Alternative payment methods or APMs are creating a more inclusive financial space. However, this inclusion comes from the disruption of traditional banking services. Let us look closely at the ordinances that affect online payments in Europe.

The Revised Payment Services Directive or PSD2

The Revised Payment Services Directive (PSD2) entered into force in January 2016. This is a European directive that regulates all the aspects involved in the new open banking system. It addresses the whole financial environment, specifically how to protect users’ data given that the core purpose of the open banking system is to share data.

The directive urges European countries to enforce strong customer authentication when it comes to payments. It also highlights common and secure open standards of communication. Also included are guidelines on incident reporting and guidelines on security measures for operational and security risks.

Directives like the PSD2 allow disruptive and traditional payment methods to store those data in a compliant manner:

• Only licensed service providers and third parties can operate in the financial environment;
• Users must be able to grant access to their data first – this is one of the requirements of laws like the General Data Protection Regulation or GDPR

Payment providers that fail to adhere to the directive are considered noncompliant. 

The FinTech Action Plan and Financial Data Storage

The European Commission’s FinTech Action Plan lists out the important synergies between the Commission’s Digital Single Market Strategy, the EU’s cybersecurity strategy, the eIDAS Regulation, and the Consumer Financial Services Action Plan.

In addition, the Fintech Action plan highlights that all institutions must “ensure a high level of protection for consumers and investors and ensure the resilience and integrity of the financial system.”

This extends to cryptocurrencies and digital money. Another heavy part of the ordinance is the GDPR. The regulation is of “critical importance for a proper use of innovative data-driven financial services.”

Allowing consumers to make frictionless transactions using APMs and Open Banking implies that users go through easy procedures to communicate their data which allows faster online payments. The ease of access comes from the promise that users don’t need to communicate their data every single time they want to purchase something. However, for this functionality to work, the data must be stored somewhere to be reused.

Regulating how financial data is stored can help curb illegal financial activities like identity theft and money laundering. More directives, laws, and ordinances will be created to regulate the great payment disruption. It is also expected that future ordinances will have a keen focus on FinTech companies and data storage.

The Future of Online Payments is Bright

Account-to-account transfers will get 67% of the entire payment services market. Meanwhile a good 38% will be taken by contactless wearables which include payments via mobile phones.

People use more than one alternative payment method. Millennials and Gen Zers maintains over 30 banking relationships, most of them are accessible through online platforms.

The reasons behind this staggering usage statistic are clear. Innovative Payment Methods allow:

• Easy and fast payments
• Purchases beyond borders. People can buy from anywhere and through any currency
• Improved trust between the customer and the merchant. Repeat purchases are likely if the initial payment experience is good
  

Online Payments with Macropay’s Gateway

Incorporating the correct APM into your payment gateway is key to generating more online payments. The more APM you offer, the larger the base of customers reached. We can help you integrate the right payment system for your target market. Contact us here.