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PSD2 – Open Banking

Zoran Šljivić, Senior Software Developer

What is behind it? What is open banking?

The concept of open banking brings a complete shift to the banking sector by shifting focus onto the customer in the digital financial services market.

What makes the open banking concept possible is the PSD2 Directive.

What is PSD2 exactly you wonder?

PSD2 is a European directive designed to increase competitiveness and diversity in the banking sector in general, with an emphasis on payments and card operations. It’s a continuation of the original 2007 directive.

Increasing competitiveness and diversity in the provision of payment, banking, and card services will certainly enable 'new players in the field' – TPPs, popularly known as Third Parties.

In short, the PSD2 Directive aims to introduce a European payment system into the digital age and provide new and innovative services with better consumer protection in digital banking.

Who exactly are TPPs or Third Parties?

TPP (Third Party Providers) can be anyone who is licensed to either provide Payment Transaction Services (PISP) ​​or Account Information Services (AISP). This means that as of now, fintech companies that have an idea for new services and products they would like to offer market clients can apply to become a TPP as an AISP, PISP, or both. Of course, with the client's permission to access their information.

Why is this good for bank users?

Primarily because banks will now have to become more competitive in the market as they will no longer have a monopoly on customer data.

The idea, for example, might be that a fintech company develops an application through which a user can access their accounts at different banks at once. For example, one does not have to have three applications to access accounts at three different banks.

Wondering how feasible it is? Using the Application Programming Interface. But more on that in the next article.

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