The two PSD2-enabled services—Payment Initiation Service Providers (PISPs) and Account Information Service Providers (AISPs)—will fuel competition in EU’s payments landscape. The Interchange Fee Regulation (IFR), on the other hand, will introduce fee caps, unblend interchange and scheme fees and abolish restrictions on honour-all-cards rules and network licensing, resulting in redistribution of costs of and revenues from card transactions.
With the proliferation of Alternative Payment Methods (APMs) in the European Union, the card payments share of the e-commerce market has steadily declined from 59 percent in 2012 to 51 percent in 2014. In addition, research suggests that APMs like iDeal (a bank transfer solution) will help banks to scale, dominate the payments space and limit the growth of cards and e-wallets.
Both PSD2 and IFR will lay the foundation for disruptive innovation by network operators, card issuing banks and merchant acquirers. Consumers can expect online and in-store payments to be revolutionised by PISP integration. In addition, new digital lending solutions will integrate AISPs and PISPs to offer point-of-sale finance and deferred payment options—wherein consumers can pay for a purchase via multiple accounts and on credit.
Network operators will enter the interbank payments market that the third-party payment providers (TPPs) can leverage effectively. While interbank payments in the United Kingdom are near real-time, network operators in the rest of Europe can stay relevant in the market by leveraging their relationships with banks and issuers to establish new real-time interbank schemes.