PSD2 directive enhances security and enables new financial services
The EU's Payment Services Directive (PSD2), effective since 2018-2019, has tightened security for digital payments and paved the way for open banking.
The European Union's Payment Services Directive (PSD2), which became effective across the Nordics between 2018 and 2019, has introduced significant changes to digital payment security and opened avenues for new financial services.
Key impacts for consumers include enhanced security through strong customer authentication (SCA) and the opportunities presented by Open Banking. SCA mandates the use of at least two independent factors to verify a user's identity, thereby reducing the risk of fraud and identity theft in online transactions.
Nordea emphasizes that these heightened security measures, often implemented through mobile applications like NordeaID or BankID, provide stronger protection against digital fraudsters, even if occasionally perceived as an inconvenience.
Open Banking, facilitated by PSD2, allows third-party providers access to customer bank account information and payment services with explicit customer consent. This can enable consolidated views of accounts from multiple banks within a single app or direct payment initiation from e-commerce sites without logging into the bank's own services, utilizing Application Programming Interfaces (APIs).
The directive specifically regulates account information services and payment initiation services. Nordea also notes that a forthcoming directive, Open Finance, is expected to bring further transformations to the financial services landscape.