Moderating the panel discussing the upcoming PSD3, PSR and IP regulations, Daniel Hellmann, director, risk advisory, payments at Deloitte spoke with Simone Del Guerra, head of central institutions & international sales at Nexi Group; Nuno Epifânio, policy officer – retail financial services at the European Commission; Kevin Flood, director – payments ecosystem strategy at FIS; and David Malley, payment industry engagement lead at NatWest.
Before diving into the panel discussion, Hellmann asked the audience what theme of the upcoming regulation has the highest priority for their institutions. Matching the key theme of the conference, 79% of respondents stated that instant payments is the clear priority.
Picking up on the poll result, Hellmann turned to Epifânio first, who gave a detailed overview from the European Commission’s perspective on what has been happening in the regulatory landscape. Epifânio explained that, while he cannot say much that the audience wasn’t already aware of, the European Commission is working together with the council and cabinet in drafting updated versions of the PSR and PSD3 proposals. “Regarding the [European] council, we just finished the last meeting and are preparing the progress reports on the PSR and PSD3.”
Adding to Epifânio’s updates, Del Guerra explained that they are working together to ensure readiness for instant payments. He noted that instant payments are a big opportunity in the market and key to survival for SMEs, so his priorities are working together to develop solutions and value added services in that space.
Flood highlighted that standardisation is a key element in the upcoming changes. “We need to standardise across the board, that would allow for far more innovation to happen.”
Picking up on the point of standardisation, Epifânio explained that this was an idea that was considered but ultimately rejected in the PSR proposal drafting. “The reality is there is no common standard in the EU. People use different standards and there are no preferred APIs at the moment, so how would we recommend to go for one over the other? We decided not to go forward with it, because we did not see the push to go in that direction.”
The conversation then turned towards who is the ultimate benefactors of the upcoming regulatory updates in the space. Malley commented: “The whole regulatory package is clearly designed to primarily benefit consumers through choice, as well as fintechs and SMEs. From a bank point of view, you need to figure out how to make it come together. PSD2 opened up the possibilities for open banking, and we are seeing increasing interest from merchants on how to use this. But there needs to be commercial incentivisation to make it attractive for all parties in the ecosystem.”
When it comes to implementation, Malley highlighted that there is a lot of work to be done with the regulatory package, and that the duty to comply hinders opportunities to innovate in other areas of business. Especially fraud is a concern at the moment, with the UK in particular also facing incoming APP fraud reimbursement requirements on the horizon.
Del Guerra commented: “Obviously there is a difference in FI's strategic approaches, and we find that some players in the market are not ready - and it’s hard to be ready for something that no one can control. There is a lot of effort from FI side on infrastructure, but operations also needs to be looked at. There is a lot of discussion around fraud, but another complex challenge is meeting customer expectations. They are expecting faster, more effortless payments.”
When asked what the implementation milestones are that financial institutions need to consider, Del Guerra commented: “Compliance is first, obviously. Then: plan and test. Then it’s infrastructure, which is going to take some time. If you have not started, then that’s a problem. The other part is customer engagement. There is a need to figure out the strategy on what you are going to do with the new regulations, starting with instant payments. Each FI will have its own proposition. And then the last point is cooperation - think about how you cooperate with other players in the payments space to provide solutions.”
Flood agreed, stating that without collaboration, FIs face the risk of standing still. Especially instant payments in the UK is something that most institutions use, so the amount of data available is incredibly crucial. He emphasised that now is the time to start on having those conversation and initiating the collaboration.