As the landscape of financial services changes from bricks and mortar branches to online banking, so too must the laws which govern the industry.
The European Union in recent years has been miles ahead of other regulatory bodies in the world when it comes to consumer protection, bringing in a range of tough laws such as GDPR and the end of geo-blocking.
The Second Payment Services Directive can now be added to the list of consumer legislation to be brought in by the 28-member body in recent times.
But first of all, what is it?
The Second Payment Services Directive or PSD2 is a European Union law which comes fully into force on 14th September, although some elements have applied since January 2018.
The aim of the law is to promote transparency, competition and innovation in the banking sector and to make it more secure for consumers to make electronic payments when shopping online or using online banking services.
As part of this effort to make online banking and shopping more secure, the law will introduce what's called Strong Customer Authentication (SCA).
The principle of SCA is to increase the security and safety of online banking and shopping through the introduction of two-factor authentication. In short this means having to give two pieces of information, such as another code or your mobile number, when carrying out online transactions in order to verify your identity. And in the near future, customers could even be asked to confirm their identity using voice recognition software.
Two-factor authentication won't always be required though.
For instance, contactless payments under €30, payments at unattended payment terminals for transport fares and parking fees, and payments to trusted beneficiaries that you have set up through your bank, will all be exempt.
Your bank should be in touch in due course with the specific steps you might have to take, but they will more than likely include updating your banking app and registering or updating your mobile phone number.
You'll then most likely be asked to confirm several digits of your phone number as well as your personal access code in order to access your online banking going forward.
It's important that you follow any instructions that your bank gives you because if you don't, you could find yourself locked out of your online banking come 14th September.
Speaking at the start of a week-long awareness campaign to highlight the changes, Gill Murphy, the BPFI’s head of payment schemes, said consumers should “carefully read the information provided by their bank in relation to PSD2."
“This information will outline what changes customers can expect as well as any actions that they may need to take in order to ensure continued access to their online accounts without interruption. It is important to remember that these changes are being introduced across Europe to help counter fraud and provide better protection for consumers and their online accounts.”
It's not all bad news though as PSD2 will have some positive implications as well. Open Banking might also mean a change in the way you shop as it will allow third-party providers (TPPs) like webshops to give you the choice of paying directly from your bank account as opposed to your credit or debit card.
Open Banking will also allow consumers easier and better access to all their accounts. For example, KBC customers can now view any accounts they also have with BOI or AIB within the KBC app, thanks to PSD2.
Does this all sound like an awful lot of hassle or is it good news that steps are being taken to keep you safe online?
Get in touch and let us know!
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