- Thomas Rijneveld
- and Emiel Kuiken, PwC
by Thomas Rijneveld and Emiel Kuiken, PwC
Since the adaptation of the Payment Service Directive (PSD) in 2007, significant progress and integration of payments in the EU has been achieved. The current PSD is aimed at improving competition by opening up payment markets and providing a legal platform for SEPA (the Single Euro Payments Area which is intended to harmonise payment processing across Europe).
The rapid pace of technological innovation can be considered as one of the main drivers for a revised PSD (PSD II). To regulate new services that have emerged in the area of internet payments, and strengthen competition between banks and third parties, the revised PSD introduces the concept of ‘access to the account’. This concept allows third parties to provide the following services:
1. Account Information Service (AIS), requiring a bank to share account information (i.e., account balance and account details) with third parties upon request of the account holder; and
2. Payment Initiation Services (PIS), allowing a third party to send payment instructions to the bank in the name of the account holder. The bank should treat this payment equal to the payment instructions send directly by the client.
So why is this relevant for treasurers?
Both the AIS and PIS can add value to the treasurer; however, the combination of both will be most beneficial as it may provide powerful alternatives to current cash management solutions.
Today’s challenge for many treasurers is to obtain a holistic overview of the cash positions scattered over a heterogeneous bank infrastructure. The AIS services require banks to share account information (based on the EBA standard) such as the account balance to third parties which can be used to create a real-time overview (most likely in a SAAS environment) of all bank accounts covered by the PSD. Many (large) treasuries may already have such an overview, but rarely is this based on real-time information. AIS might bring such functionality to a wider audience and will do so at much lower costs than collecting intraday bank statements.
The Payment Initiation Service will offer treasurers an alternative to maintaining a multitude of bank specific interfaces by using the third party as an intermediary, much like the functionality of payment hubs or payment factories. Both payment hubs and payment factories are not widely available to all corporate treasurers and are often an expensive alternative. Third parties may use the PIS to send payment instructions to all banks covered under the PSD based on the (to be created) EBA standard. This will allow the corporate to initiate and approve all payments in one centralised system. In addition, the PIS may also offer an alternative to point of sale (POS) card payments. Based on the PIS, the consumer may authorise a third party to initiate a credit transfer from their account, rather than a costly card payment. Other applications of the PIS can be expected to pop up once the revised PSD is in effect.
We believe that the revised PSD, in its current draft, will indeed create room for ground-breaking innovation. For banks servicing the treasurer, the most threatening will be the joint application of AIS and PIS, which will allow third parties to offer alternatives to cash pooling. Third parties may create solutions that will combine the holistic view on the bank account’s cash position with target balancing by sending out automated payment instructions to cover overdrafts or send surplus cash to investment accounts. Although issues such as intercompany loans and documentation will need to be solved, we believe that ‘Access to the Account’ may offer good alternatives for cash pool solutions. We look forward to the future of payments and welcome innovation based on the new opportunities created by the updated European regulation.
