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Saturday, 13 January 2018

Payment Services #.0: When Payments Finally Become Less Visible

Today marks the dawn of new payments regulation under the second Payment Services Directive (PSD2). Yawn, you say. But, unusually for a technology-based industry, the experience for customers should outstrip the hype. Is this Payment Services 2.0? 3.0? 4.0?  Who cares? After all, "paying" for something or "checking your balance" should not be an activity all on its own. It should be just a small part of something else you're in the middle of doing. In other words, it's what you won't see that should make all the difference...

You might not deal with your bank anymore when paying or checking statements

New “payment initiation services” will mean you can use a separate service provider to make payments from your bank account or other payment accounts, without logging-in to your payment account provider's systems.

New “account information services” will combine the information from all your payment accounts and display it to you in one place. You could also permit that information to be sent to others (e.g. a lender, a comparison website or professional adviser). 

Not only will such services cut the amount of time you spend logging-in to different providers. They'll also make it easier for you to gather your financial information, understand and control your financial affairs and make payments from a range of accounts. 

You won't see retailers charging you for the privilege of paying them

From now on, nobody can add a charge based purely on how you pay them. So all their profit will be in the price of the goods or services you buy, not the extras. 

The UK has typically gone further than other EU countries to apply this to every type of consumer payment method. So, any contract term requiring such a 'surcharge' will not be enforceable. In fact, there will be an implied requirement to refund the excess. Or you could initiate a chargeback via your debit/credit card issuer, or make a claim against your credit card issuer under section 75 of the Consumer Credit Act. 

In addition, any extra charge for using a commercial payment method must be limited to the supplier's cost of accepting that type of payment. Again, no room for extra margin here.

You won't realise that big loyalty schemes are now policed by the FCA

Retail loyalty schemes, such as gift cards, fuel cards and other ‘limited network’ programmes, will need to be registered with the Financial Conduct Authority if the value of their transactions meets or exceeds €1 million (or the GBP equivalent) in any 12 month period.

The intention is to safeguard customer funds that are paid into wider schemes, as with any other e-money or payment service.

The FCA must then decide if the scheme really is a ‘limited network’ that's entitled to an exclusion from e-money and payments regulation. 

If not, then the retailer may have already committed an offence by offering the scheme in the first place.

The retailer also commits an offence if it fails to notify the FCA within 28 days after reaching the €1 million threshold. So retailers should check the status of their loyalty programmes well before then!

You will see less delay in handling your complaints 

The time for processing customer complaints has been cut from 8 weeks to 15 business days. This increases the pressure on payment service providers to operate much more efficiently, so they have fewer complaints and find it easier and less costly to solve any problems you do have. 

You won't see the increased security

You won't see all the standards-setting and development work that's going on behind the scenes to make all of this happen in a far more secure way than payment services have worked before.

The new regulations bring mandatory technical standards for better ways to make sure customers are who they claim to be, and for the different types of payment service providers to work together where you need them to do so.

So, finally, "payments" will become less visible... if you know what I mean.