On September 14, 2019, the revised Payment Services Directive (PSD2) went into effect across the European Economic Area (EEA). The PSD2 EEA agreement aims to improve the security of online payments, increase competition in the market, and promote innovation in the financial sector.
Under the agreement, banks are required to provide third-party payment providers (TPPs) with access to their customers` account information through application programming interfaces (APIs). This means that customers can use third-party services to access their account information and initiate payments, without having to share their login credentials with the TPP.
Furthermore, the PSD2 EEA agreement mandates the use of strong customer authentication (SCA) for electronic payments. This means that customers must provide at least two forms of authentication, such as a password and a code sent to their mobile phone, to confirm their identity before a payment can be processed.
The introduction of APIs and SCA is a major step towards creating a more secure and competitive market for online payments. By allowing TPPs to access account information via APIs, customers have more options when it comes to managing their finances and making payments. This increased competition should drive down prices and improve service quality across the board.
At the same time, the introduction of SCA will help prevent fraud and protect customers` sensitive information. By requiring multiple forms of authentication, it becomes much harder for hackers and other malicious actors to gain access to a customer`s account and steal their money.
Overall, the PSD2 EEA agreement is an important development in the world of online payments. By improving security and promoting competition, it should help create a more open and innovative financial sector for everyone.