Will CSPs start paying the bills?
As the PSD2 (Revised Payment Service Directive) takes effect in the EU, banks that previously had a monopoly on consumer account details will now be obligated to safely disclose that information to third-party providers, writes Roman Taranov, the chief executive of RGK Mobile.
For the first time, users in the EU will be able to use other providers to pay their bills and banks are now obligated to provide those mediums access to user account information via open application programme interfaces (APIs). The European Commission’s rationale for PSD2 is to create innovation, improve security for online payments, and keep consumers account information safe.
And in fact, PSD2 will do just that by introducing two financial options to the market: AISP and PISP. AISP or Account Information Service Provider are service providers that can access bank customers account details and consequently understand user spending habits. PISP or Payment Initiation Service Provider are the providers that will make a payment for the customer like a bill payment.
With the new changing landscape for online and mobile payments, banks will certainly lose a large percentage of retail payments over the years, opening the doors for other PISPs to step in. In fact, mobile operators will be poised to become the new go-to financial institution for subscribers. One major reason: direct carrier billing (DCB) gives many mobile carriers a head-start on strong customer authentication (SCA), one of the major aspects of the PSD2 update. Consumers who use direct carrier billing to pay for carrier services will be allowed to skip the current two-step SCA verification process, making their transactions much simpler and faster. PSD2 now provides mobile operators the opportunity to collaborate with various merchants to adopt direct billing and develop new services for consumers.
Bharat Bhushan, the CTO of banking and financial markets at IBM UK & Ireland, echoes these thoughts, stating that “the beneficiaries of PSD2 – the retailers, utility providers, travel and transport companies and government departments – are eagerly awaiting the arrival of payment utility functions that they can simply plug in and provide their customers with a choice of making direct payments whilst reducing their card processing fees at the same time.”
Most utility or service customers can take advantage of the fact that PSD2 will lower transactional costs which benefits the customers by providing them additional savings or additional revenue to buy more goods and services. And there is no better way to do so than via a mobile carrier that can provide a quick and easy method for users to pay for goods, mobile content, and services – all at once, right at the palm of their hand.
In addition, carriers are uniquely positioned to leverage the vast amounts of user data they possess as well as personal insights into user location, habits and behaviours and past purchases – all which could benefit the merchant and user. With financial data now available to operators, the combination of operator and financial data can allow marketers, merchant, and operators to directly serve the unique needs of each consumer. Providing a transparency that serves as a win-win for all.
As PSD2 is taking effect across the EU, the new change has the power to make marketing precise, merchants profitable, and customers invaluable while leaving the operator paying the tab.