PSD2 - New business opportunities and how to exploit them
The new rules and regulations of PSD2 have paved the way for businesses and entrepreneurs to start up new types of businesses. In this post, we will explain what these new businesses are and how they work.
Why do we need these new rules?
First, let’s just make it clear which new business models we are talking about; Payment Initiation Service Providers (or PISPs) and Account Information Service Providers (or AISPs).
In reality, these business models are not actually new. For example, PayPal is an AISP, but they have been around for quite a while now. So really, it is not about PSD2 making these business models possible, it is about making them more attractive.
You see, so far, this type of businesses have faced issues in gaining consumer trust. Most people are a bit hesitant putting their money in the hands of some online service provider - at least if they don’t really know them. The legislation on these business types has also not been very clear and it wasn’t obvious which rules applied to them. As a result, consumers didn’t know what to expect.
PSD2 is solving this problem. First, by clearly stating which rules apply to them, how they should behave, and what information they need to share. Second, by streamlining the legislation across all EU countries, PSD2 makes it easier for a PISP or AISP to go abroad and gain trust and success in other EU countries.
What is a PISP?
A Payment Initiation Service Provider initiates payments on behalf of the consumer. That is, the payer allows the PISP to transfer money for a purchase instead of paying with a card. Often the PISPs transfer the money immediately so the order can be processed right away.
Examples of PISPs are payment services such as PayPal, MobilePay, and Sofort. However, there’s also another way to do it - an option that may be relevant for larger online shops. Amazon Dash buttons is a good example of this second option. Dash buttons are available as virtual buttons on their website or as physical buttons to place around the house. Each button is related to a specific product. When you push the button, you automatically order a new batch of the product.
Becoming a PISP is not easy. There is high initial capital requirements and a long list of requirements to fulfill - but also a lot of potentials to be reached.
The new legislation for PISPs covers areas such as liability, data protection, security requirements, open communication, information sharing, limitations, and insurance requirements.
What is an AISP?
An Account Information Service Provider offers consolidated information on a consumer’s payment accounts. With PSD2, AISPs can now gain access to all banks, meaning that they can provide all EU consumers with an overview of their bank account(s). Besides providing an overview, AISPs offer services such as budgeting, reminders, alarms to help people stay within budget, and other related things.
Examples of AISPs are Spiir and Moneybox. The two are a bit different though. Spiir offers an app, where you can see your accounts, what categories you spend your money on, set budgets and spending limits, and so on. Spiir has the Spiir Helper, who helps you stay within the set limits. With Moneybox you put money on your Moneybox account - either a one-off amount, weekly amounts, or round-ups from your purchases. Moneybox then invests the money for you. You can withdraw at any time.
The requirements for becoming an AISP are not as strict as for PISPs - this is a business model that a regular entrepreneur can start.
PSD2 legislation on AISPs covers account access, data protection, security requirements, open communication, data storage, information sharing, and insurance requirements. Generally, AISPs are (with a few exceptions) subject to all rules relating to payment service providers.
To sum up
While PISPs are for the big guns, AISPs are a great opportunity for basically anyone who wants new challenges within fintech. If you want to read more about PISPs, AISPs, and the companies mentioned above, take a look at our e-book.