Bringing down walls, letting innovation in (Part 1)
The move to a cashless society is visible everywhere you look.
While Germans love their cash payments, even autobahn restrooms (yes, the ones most people whizz by at 180kmph) are going contactless. Accumulating enough small change for three children’s needs on a long car journey used to be a regular challenge – no more – we just tap and… this is just one example of why I am personally grateful for an increasingly ‘open’ payments ecosystem!
The speed of this global digital revolution is increasing, driven – in part – by a more technologically and commercially open payments ecosystem.
But the question remains; when it comes to payments, how open is too open? We are talking about peoples’ money, and while everyone wants convenience, when that convenience opens the door to fraud suddenly the tables turn.
This being the case, no-one can argue against the fact that we have to regulate financial services because of the massive impact on society. There is, however, a tendency for the payments ecosystem to expect doom and gloom regarding new regulations; seeing them as restrictive, interfering, costly… or all of the above. The reality is that the Payments Services Directive 2 (PSD2), along with other regulatory changes being enacted across Europe and the world, is a massive opportunity for all participants in the payments ecosystem to carve out new revenue streams. PSD2 is shaking up the industry, and for good reason.
Open payments require new kinds of collaboration between traditional payments players and new entrants, and successful collaboration has its foundations in trust.
The payments ecosystem is changing, with new technologies, schemes, and regulators working to bring down the walls. However, strong regulation is needed in order to ‘aim’ the wrecking ball. For example, the goal is to enable new kinds of payments services through data access, but not at the expense of data privacy. Regulation, including PSD2, opens up payments and mandates data access and transparency, while also encouraging competition and innovation.
The regulatory drive for competition and innovation is in turn spawning new payments players across the full spectrum of services. From frictionless checkout, to real-time payments – new business models are rapidly appearing.