Douwe Lycklama - PSD2 ‘access to account’ (XS2A): impact op de e-commerce payment mix en het...

Tomorrow’s transactions today

Game changing accelerator in financial servicesPSD2 ‘Access to account’ (XS2A)

Douwe Lycklama - 8 March 2016

2 PSD2 ‘Access to Account’ (XS2A) - Game changing accelerator in financial services. Douwe Lycklama. March 2016. © Innopay BV. All rights reserved.

• Innopay: innovation experts since 2002

• >20 consultants

• Practices: Payments, Digital Identity, e-Business

• Services: Strategy, Co-creation, Transformation

• Member of EBA, EPCA and ECP

• Founding member of HollandFintech

Introduction

Douwe LycklamaPartner


Today’s topics


I. How the Dutch Pay anno 2016

5 PSD2 ‘Access to Account’ (XS2A) – November 2015 © Innopay BV. All rights reserved. Source: ECB, 2012

Retail payments: iDEAL and Maestro are important payment methods

Cash-transacties in retail (%)

Greece - 97%Poland - 90%Italy - 89%Spain - 80%Ireland - 75%Germany - 69%Switzerland - 66%Austria - 64%

UK - 57%Belgium - 54%

Netherlands - 59%

France - 50%Nordics - 46%Lux – 29%

59%

39%

2%Offline payment preferences NL(%)

Cash

Maestro

Other

53%

12%

8%

27%

Online payment preferences NL(%)

iDEALCredit cardAcceptgiroOther

Source: GfK; Shopping today. Thuiswinkel Markt Monitor: jan – jun 2015


But, the payments landscape is changing rapidly driven by technological innovations across payment channels

Source: Innopay analysis


Successful payment solutions provide Reach and Conversion against fair Cost

CONSUMER MERCHANT

REACH

COST1.

2. 3.

CONVERSION



Putting retail payments in a broader context: three key change drivers in financial services

Regulatory reforms will disrupt traditional value chain (PSD2,

eIDAS, GDPR, AML4, IFR)

3. EUROPEAN REGULATION2. FINTECH & COMPETITION

New ‘tech driven’ players are capturing market share

1. CUSTOMER BEHAVIOUR

Seamless financial services anytime, anywhere, any device


II. Brief introduction PSD2 XS2A


PSD1 vs PSD2: two key change areas

• Requirements for strong customer authentication:

- Access to payment account online

- Initiation of electronic transactions

- Actions through remote payment channels that bear risk of payment fraud or other abuses

• European Banking Authority (EBA) to further specify security requirements in Regulatory Technical Standards (RTS)

• ‘Access to account’ (XS2A) for:

- Payment initiation services (PIS)

- Account information services (AIS)

• Entrance of Third Party Providers (TPPs) by introducing two new regulated roles:

- Payment initiation service provider (PISP)

- Account information service provider (AISP)

• Applies to Consumer & Business payment accounts (online accessible)

1. Security 2. Access to account (XS2A)



It all started in 2006 with ‘overlay services’…


...then Personal Financial Management was added to the scope


III. Why PSD2: infrastructure perspective

14 PSD2 ‘Access to Account’ (XS2A) – November 2015 © Innopay BV. All rights reserved.

Payment infrastructure: over the past decades, a ‘stacked’ ecosystem emerged

Customer Merchant

SCT, SDD Cards

ACHVisanet, Banknet

Real Time Gross Settlement

Paye

r acc

ount

Bene

ficia

ry

acco

unt

Traditional four corner model

Debtorbank

Creditorbank

Information FundsSource: Innopay analysis, Euro Banking Association (EBA), European Central Bank (ECB)

• The payment infrastructure consists of:- Instruments- Processing- Settlement

• SEPA regulation harmonised the payment infrastructure layer

ACHVisanet, Banknet


Instruments

Processing

Settlement

SEPA


Growth in e/m-commerce sparked alternative services ‘on top of’ the payment infrastructure

Source: Innopay analysis, Euro Banking Association (EBA)

• Especially innovative ‘payment initiation sevices’ emerged:

- Focus on information messaging rather than funds transfer (‘decoupling’)

- Not regulated under PSD1- Have primarily ‘local’ reach (limited

geographically or platform wise)

• Also emergence of ‘account information services’

• Non-bank service providers play an important role in this ‘services layer’

• Some regulated as Payment Institution (PI) under PSD1 (2009)

Customer Merchant

e.g. Browser e.g. Webshop

SCT, SDD Cards, Cheques

ACHVisanet, Banknet


Paye

r acc

ount

Bene

ficia

ry

acco

unt

Online banking Routing service

Online pymnt provider


Information Funds


ACHVisanet, Banknet


Instruments

Processing

Settlement

SEPADebtorbank

Creditorbank


Result: fragmented and inefficient landscape with regulatory challenges

Source: Innopay analysis, Euro Banking Association (EBA)

Inconsistent application of PSD across member states resulted in ‘regulatory gaps’:• Uncertainty regarding liability• Potential security risks in the payment chain • Lacking consumer protection in certain areas• Competitive distortions

Customer Merchant


ACHVisanet, Banknet


Paye

r acc

ount

Bene

ficia

ry

acco

unt




Information Funds


ACHVisanet, Banknet


Instruments

Processing

Settlement

SEPA

• Poor reach

• Good conversion

• Good reach

• Poor conversion

Services

InfrastructureDebtorbank

Creditorbank

e.g. Browser e.g. Webshop


New model emerging under PSD2 providing third party access to account (XS2A), thereby disrupting existing value chains

Emerging XS2A model under PSD2

Paye

r acc

ount

Bene

ficia

ry

acco

unt

Routing service

Source: Innopay analysis, Euro Banking Association (EBA), Innopay blog XS2A redefining the acquiring domain

Customer Merchant


ACHVisanet, Banknet


Paye

r acc

ount

Bene

ficia

ry

acco

unt




Information Funds


ACHVisanet, Banknet


Instruments

Processing

Settlement

SEPA

Customer Merchant

Debtorbank

Standardized interface

Debtorbank

Creditorbank

Payment Initiation

Services (PIS)

Account Information

Services (AIS)

Creditorbank


ACHVisanet, Banknet



ACHVisanet, Banknet


Instruments

Processing

Settlement

SEPA

• Challenges customer relation • Adds to competition in

acquiring business

• Challenges customer relation

e.g. Browser e.g. Webshop e.g. Browser e.g. Webshop


https://www.innopay.com/blog/access-to-the-account-xs2a-accelerating-the-api-economy-for-banks/


IV. Implications for different actors


PSD2 XS2A will enable customers more options to interact with banks through TPPs, potentially causing fragmentation in services

Bank account

Internet banking and mobile app

Customers Customers

TPP

Bank domain Bank domain

Pre PSD2 XS2A era (Post) PSD2 XS2A era

Payment account

Entrance of TPPs (incumbent, fintech, bigtech)

Bank account

Internet banking and mobile app

XS2A



This does NOT mean, however, that a merchant’s payment page will look like this in the PSD2 era

Please make sure that you select the correct payment method

PSD2 XS2A myth buster:• Merchants will only require 1 Payment initiation service

provider to establish pan-EU reach • Merchants can consider adding an additional payment

initiation service provider if it offers value added services (e.g. services based on account information)

Please select your payment method Your order


Fragmentation will trigger different behaviours of actors involved

Consumer Merchant ASPSP Acquirer

Only one payment account to shop

online across Europe

Keep check-out simple and maximize

conversion

XS2A compliance with minimal effort/impact

Safeguard market share and merchant

relationships

• Reach offered no longer ‘exclusively’

• More competition on Merchant Acquiring

• Loss of market share• Increasing price pressure

• XS2A Compliance• Securing consumer funds• Liability partition vis-à-vis

TPPs• Dispute resolution• Profitability: revenue

model vs fee structure• Communication

• Reach• Conversion• Costs

• Reach• Trust (privacy)• Ease of use• Costs (bank side charges,

merchant surcharge)XS2A

‘con

cern

s’Go

al



Important questions from a merchant perspective?

1. (Too) many payment initiation options make it difficult for consumers to distinguish ‘good from bad’?

2. More stringent PSD2 security requirements (‘strong customer authentication’) could negatively impact convenience and UX?

3. Potentially changing payment mix (shift to ‘pay afterwards’) with consumer’s payment account information being available (better insight in credit risk)?

4. Less dependency on cards-based payments?

5. Redefine the relation with PSPs by becoming TPP?

6. Options for great customer experience and intimacy (reduce friction)?

7. …

Tomorrow’s transactions today

We look forward to itContact us Douwe Lycklama

[email protected]

+31 6 55 71 11 50

mailto:[email protected]

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Douwe Lycklama - PSD2 ‘access to account’ (XS2A): impact op de e-commerce payment mix en het...

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