Future Digital Payments in the EU - PSD2 & XS2A

Esteban Díaz AsúaCryptoFintech

PSD2 Directive in 2 mins

Adopted on 8/10/2015 (~2 years to be enforced in member states). Regulatory efforts have focused in increasing competition, eliminate

borders and get rid of intermediaries. Security is also of great concern (2FA). Even limiting kickbacks (interchange fees).

Everything is here:http://ec.europa.eu/finance/payments/framework/index_en.htm

XS2A also pushes incumbents to allow access to Third Parties (Access to the Account, Articles 58 y 59).

We introduce different players

AISP (Account Information Service Providers), e.g. Fintonic. PISP (Payment Initiation Service Provider), e.g. Bankast. ASPSPs (Account Servicing Payment Service Provider) e.g. your bank.

How are we paying today

How will we pay

Remember

Payment IS DIFFERENT FROM Settlement

How do we access PFI

*PFI = Personal Financial Information

How will we access PFI

*PFI = Personal Financial Information

But not everyone uses the Cards network now

And did we need to wait for regulation to innovate?

Some Startups have surfaced prior to deregulation. PFMs and Payment initiators, using brokerage services (Yodlee,

ewise). Moving funds can be achieved using parallel networks (Bitcoin) as an

alternative to SWIFT. SEPA has made things easier in Europe in any case (borderless).

Push the boundaries

So what now?

What do acquirers do? What do the PSPs do What do card networks do? What do the issuers do? What do interbank networks do? What do YOU do?

Networks (the incumbent) are getting nervous

Gaining size

Diversifying

Absorbing other players in the value chain

Rallying the community

Copying each other

But the early new entrants enable others, so the community is up for grabs

They solve many problems, like PCI-DSS Compliancy

And they give access to other Payment Networks with Value Add

Niche playing is fine, they are humongous in size

As a Startup or Intrapreneur, what do I do? Can I leverage Open APIs and specialist Platform Providers?

You can fix your target in niche services and “go solo”. You can try and partner with existing actors enabling new revenue

sources NOT ONLY PAYMENTS letting them cross the fence.

In both cases, leveraging Open APIs is a safe bet, remember the mashups.Remember, the interchange fees for issuers have been limited, the value

chain is broken.

But you cannot forget that the value is in servicing the edges

The Consumers The Merchants

We focus on one or the other with B2B or B2C offerings.

And that there is compliancy to think about

Payments License KYC (Know Your Customer) AML (Anti Money Laundering)

Can we outsource some of this?

Regulators want to help

Payments are interesting

Oh, wait, this is only in Europe

Yes, but it shows trends, and you can adapt to other markets, in any case Asia is now all about AliPay and Tencent (WeChat) leveraging it’s wallets, Africa is the land of m-pesa, etc. But Europe is leading where it can lead, deregulation, OpenAPIs, etc.

Now the workshop… (1)

New Startup focused on creating a PISP (Remember) for Merchants that are located outside the home market. We are the guarantors, consumers trust us. We have to make DCC and settlement seamless.

Helping the Big Boys (2)

A Bank with a huge issuing business (interchange fees disappearing) located in Spain needs to start creating new sources of revenue without increasing fees much. Thinking of a Wallet Business that enables Merchants and offers

them targeted marketing. It has the problem of customer adoption and choosing payment

options.

The Elephant in the room (3)

A Messaging Network opens APIs to allow third party apps, we create a platform to quickly enable this Bots. We have to take care of compliancy for Payments (or not?). What do we add? Maybe XS2A is the answer, how do we get access?

The pipes… (4)

Any ideas? Acquirers were also removed from direct contact with both Customers and Merchants… Are the pipes just going to remain like that? They will always be needed and they can help in other types of

networks or settlements… maybe... Can we help?

Thank You

Questions ?@esteban27