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PSD2: blessing or a curse for interoperability?

PSD2: blessing or a curse for interoperability?

Eric van Vuuren

Consultant Strategy & Analyses

16 November 2017

PSD2: blessing or a curse for interoperability?


The PSD2 guidelines are not necessarily the solution to a better interoperability in the European banking world. Banks will update their legacy systems because of these guidelines, which should ensure the harmonization and standardization of payments. But the risk of fragmentation lies in wait, says chairman of the e-Payments committee of Ecommerce Europe Paul Alfing.

First of all: why is interoperability important for e-commerce?

“Interoperability is the ability of different systems to work together. In Europe, there are 4,000 banks and that means many different systems, but those systems often don’t work together. That is a problem for e-commerce because web shops want to reach customers across the border of the country where they are based. If the systems of a, for example, French and Turkish bank can’t communicate, it will be hard or even impossible to reach the customer. Customers with a credit card can overcome this difficulty, but not everyone has a credit card or wants to use it. The alternatives are often limited by national borders.”

Well, PSD2 is on its way: there is your solution. Right?
“PSD2 provides a lot of opportunities. It is an example that regulations are harmonized, so I welcome the approach of PSD2. The European Banking Authority (EBA) is working on the regulatory standards, but I think that the devil is in the detail. Because banks have these standards to start with, but they must develop the needed interfaces themselves. If every bank creates its own interface the problem with interoperability remains unsolved.”

What could be a solution?
“All these European systems need an umbrella, something that connects them. That interlayer needs to be standardized, so every bank and every system can plug into it. I like to compare it with a travel plug, which you use to get electricity from every socket in the world. In this particular situation, I think an API could work as ‘travel plug’. I don’t think it is possible to develop just one API for all of Europe, but we can work towards a stable framework in which such an API should meet. If we can do that, I think we are heading in the right direction.”

Why is it so hard to develop a standardized API for Europe?
“Well, you tap the business model of banks. They are very cautious when it comes to that. On the other hand, you have to deal with many nationalities who prefer their own solutions. In Europe, there are a lot of parties, each with their own vision, pace and level of development. The velocity of a development is dependent on the slowest participant. It is difficult to wait for them when there are a lot of solutions that already could be used. There are several countries who now want to take the leading role in the development of a new standard, but when seven parties are developing you end up with seven standards. In that case, there is fragmentation other than harmonization.”

When can we see the first results?
“I hope that the implementation of PSD2 starts in 2018, but I fear that there are still steps when that happens. It is not difficult to build an API; it is difficult to get all parties to agree on one API.”