Minister of State at the Department of Finance Michael D’Arcy TD addressed the National Conference on Cloud Computing (NC4) on the evolution of online payment systems, open banking and PSD2 regulations.
The Minister outlined the regulatory environment at G20, European and national level underpinning the rapid development of new payments technologies and the emergence of open banking.
The Minister told the group that “new technologies have emerged and new players have entered the payments market, bringing with them new ways of carrying out payments. We can now pay over the internet, we can use our phones to make payments, we can utilise contactless to make a payment with a single tap. Equally, while payments were traditionally bank focussed, there are now many more players involved in the industry. And as services change, regulation must evolve to keep pace with that change.”
Expanding upon this point, he addressed the revised Payment Services Directive, or PSD2, which came into force this past January and establishes a common legal framework for payment services, providing a consistent set of rights and obligations for businesses and consumers making and receiving payments.
Aside from changes to scope and exclusions, PSD2 opens access to payments accounts; and it is this key aspect that will drive innovation and competition in the market, by requiring banks to provide third parties with access to customers’ payment data. New actors have the potential to significantly drive competition and customer choice in payments and banking.
Addressing data protection concerns, the Minister commented that, “the cornerstone of access to payment accounts under PSD2 is customer consent. Data can only be shared with third-party providers with the explicit consent of the consumer. Consumers will need to have confidence in that provider before granting consent to access their accounts. Trust in the service provider to keep them safe is fundamental.”
With the forthcoming General Data Protection Regulation (GDPR) directive coming into force in May 2018, data protection compliance is critical to the ways in which all businesses operate. The Minister commented that, “PSD2 requires payment service providers to put in place a security policy document including a detailed risk assessment in relation to its payment services and a description of control and mitigation measures taken to protect payment service users against the risks identified, including fraud and illegal use of sensitive and personal data. Consumer protection can never be merely an add-on in payments. Instead it must be an essential element of the business model, from start to finish. That tenet is certainly central to the Central Bank’s consumer protection objectives, which are based on the need to ensure that consumers are treated fairly and with respect and dignity by firms, and that firms act in their consumers’ best interests in all that they do.
PSD2 will allow non-bank actors enter the payment space and regulate those players already active in the market. It will enhance consumer protection and update the payments framework in the EU to take account of the technological developments in recent years”.
Minister D’Arcy continued with a summary of the changing ways in which Irish people pay for daily transactions noting the latest figures from the Banking and Payments Federation which demonstrate the value of contactless payments, comprising contactless card and mobile wallet payments, reached €1.6 billion in the second half of 2017, and more than one-in-four card payments were contactless. Digital banking transaction volumes grew over 27% year-on-year to almost 46 million transactions in the same period.
Addressing the rapid evolution of the fintech sector in Ireland, the Minister said, “Ireland’s strong track record in the sector is something which I believe we can continue to build and capitalise upon, we offer the perfect mix of financial services and technology expertise in order to cultivate a thriving payments ecosystem in Ireland and become a global location for payments and blockchain technology”.