PSD2 is part of the new open banking initiative. This is where banks across Europe will be made to open up their data through APIs, application planning interface, to facilitate an open marketplace in banking for all customers.
The EU published the directive back in December 2015 and the UK government enshrined PSD2 into UK law under the Payment Services Regulations 2017 last year. But, it is this weekend that the directive must be implemented by all banks in the EU. What is PSD2 and what does it mean for fintech startups?
The aim is to encourage innovation in banking. The directive gives customers more choice in how they manage payments and bank accounts.
One example of how this works is Starling Bank. The challenger bank offers its customers access to MoneyBox, a savings account that rounds up your small change and invests it in tech companies. This is because MoneyBox has built on Starling’s API.
Greg Hawkins, chief technology officer at Starling, told Verdict that this moment for banks is similar to when Google opened up the Google Maps API back in 2005.
“Nowadays, it’s hard to imagine any app that isn’t enriched by Google Maps. We’re at a similar place in finance and fintech – collaboration and interoperability which is fostered by these APIs is going to lead to a flowering of different possibilities.