PSD2 strengthens the positions of existing and new FinTech companies providing account servicing solutions, by given them the right to access payment accounts held at banks, which would look like this (inspired by Innopay´s blog on XS2A):
Opportunity 1 – Payment Initiation
The first should not come as a surprise: become a TPP yourself. What does it look like to be a TPP? Now, replace the TPP with PSP (see second picture below). Expand your reach to consumers – the customers of your clients. Eliminate the need of connecting to alternative payment method suppliers. Initiate a payment order at the request of the payment service user with respect to a payment account held at another payment service provider (bank). Would this not reduce transaction and authorization response times, since traditional payment participants like banks but also merchant acquirers are bypassed?
Opportunity 2 – Beyond Account Servicing
Let’s take a step further. PSPs could strengthen their position with their merchants further by acting as account information providers themselves. The customer would no longer be the consumer, but the merchant (see third picture below). You would connect directly with all merchant’s banks to give merchants full insight in all their bank accounts held. Rather than just a payment system, youmay well become a full-force treasury system, aggregating its own data and balances with all other bank balances and allowing payments to be made via that interface as well. You would not only be a PSP for the merchant, but also their TPP. But with that double role of PSP and TPP, the full extent of those opportunities is yet to be understood.
Think about it. If you can access the transactions on the merchants’ bank accounts what else can you do? What if you have a merchant that you want to take onboard, but there are concerns about its high chargebacks and refunds levels? Perhaps you should choose to act as gateway and have the acquirers settle directly into the merchant account. With your access to those accounts as TPP, you can still reconcile the received payments and provide all reporting services as if the payments were received on your own accounts. No longer holding funds, but still being able to offer a reconciliation (so called ´full service’), should result in the PSP no longer carrying chargeback and credit risks. Not only can the access allow PSPs to reconcile, it is also able to acquire insightful data about merchants, which offers additional cross selling opportunities; tailored propositions based on usage data with great analytical capabilities. The more data a party has, the more it can do for its customers, right?
I hope this provides food for thought. Expanding on the service package could become a very important strategic decision post PSD2 and how a payment processor will position itself. Tomorrow, my last post of this PSD2 series will discuss two further opportunities for payment processors under PSD2. Read it here.
- For more information, please contact me at nadja@pytchventures.com
Published on July 4, 2016 by Nadja van der Veer, payment lawyer.
