Business implications of the Payment Services Directive

Abstract

The Payment Services Directive is a piece of legislation of huge importance for the payments industry in Europe. It will regulate how payment services are provided to customers, and it will bring into being a new species of regulated financial service provider, the `payment institution'. The challenges for market participants are not confined to implementing the changes required by the directive. Important strategic choices also need to be made. In part, these will be dictated by whether the directive requires the business to obtain a regulatory licence — a question which is fraught with difficulties of interpretation caused by vagueness in the drafting of the directive. Implementation is not easy, as many aspects of the business need to be examined. These go beyond the operational changes, and involve documentation and relationships with infrastructures, correspondents and suppliers. The strategic choices will be affected by the organisation's view of the competitive landscape once the directive has bedded in. It is certain that the directive will change the marketplace, but who the winners and losers will be is a matter for debate. Some players will be unwilling to make the sacrifices inherent in a tightly regulated environment. The incumbents are likely to change position, and telecoms providers stand to gain if they are willing to embrace the opportunities which the directive offers.