If you have been paying attention to financial developments in the UK, you have probably heard about PSD2. Open banking in the UK has gone from an idea to reality very quickly, and PSD2 is an important reason why. If you run a bank or similar financial institution, you may have some vague idea of how open banking works and how PSD2 might affect you, but you may not have the whole picture. Now is the time to learn. How is open banking in Europe affected by PSD2 and is there a difference between the two?
What Is Open Banking?
Open banking refers to a standard in which approved, regulated financial institutions publicly share data through an open banking API system. Sharing this data can keep banks and financial institutions on an even playing field and allow third-party app developers to use the data to enhance the convenience and financial flexibility for individuals.
Open Banking and PSD2: Is There a Difference?
So, what is PSD2 and what is the difference between PSD2 and open banking? PSD2 is simply the mechanism which is allowing open banking to function. PSD2 is shorthand for the Second Payment Services Directive, a directive passed in 2018 requiring the nine biggest banks in the UK — RBS, Santander, Barclays, Lloyds, Nationwide, HSBS, Bank of Ireland, Allied Irish Bank and Danske — to share information through a standard, secure form. As a result, citizens can use any of these banks and be confident that they will have access to all the information that is relevant to them.
PSD2 also means that third-party app developers will be able to use shared data, with the individual’s consent, to provide upgraded financial services that they can easily access online through their mobile devices.
How Should Banks All Over the World Respond to Open Banking and PSD2?
Open banking is the wave of the future, and banks that wish to remain relevant should get on board as soon as possible. It can start with a minimum level of compliance with the regulatory reforms laid out in PSD2, but banks should be looking to upscale quickly and build their own API platforms as soon as possible. This is what everyone who does banking in Europe and beyond will be looking for, and those stuck in the old model could quickly be left in the dust.
How Can You Get Started?
A great way to jumpstart your ability to take advantage of open banking is with the Atom platform from Hydrogen. We can offer you powerful REST APIs that are easily customized for financial tech purposes. We can show you how to set authorizations and permissions, store, encrypt and transmit data, manage a wide variety of accounts digitally, develop your core digital infrastructure, and much more.
Don’t wait. Get on board with open banking now. We can show you how. Just contact Hydrogen today to request your free Atom demo.