The Payment Services Directive 2 (PSD2) was implemented in January 2018, opening the door for Open Banking, a novel program that allows third parties to access financial data. This created plenty of room for fintech businesses to innovate, design, and provide groundbreaking financial solutions.
Even so, there are still some major stumbling blocks. Regulatory barriers, for example, are suffocating open banking’s potential and posing unprecedented challenges for businesses to overcome.
The use of Application Programming Interfaces (APIs) and Open Banking has resulted in the emergence of new financial services, and lower transaction costs. Additionally, it serves an important part in improving the user experience while simplifying online purchases.
And with ecommerce sales on the increase, seamless payments will be a major element in guaranteeing retailers’ competitiveness in the developing online retail market.
Regulatory Discrepancies are Creating Obstacles
Regulatory discrepancies throughout the industry, on the other hand, are generating additional obstacles for enterprises striving to innovate, rather than helping financial service providers to accelerate the rollout of new solutions to serve merchants.
“Each state perceives PSD2 regulatory regulations differently, leading to minor subtleties that must be considered from country to country,” Galdikas said. “This leads to several variances and essentially hinders seamless implementation.”
“Payment Initiation and Account Information Services (PIS/AIS) are also used to support our Merchant API.” In many circumstances, PIS and AIS are incompatible; yet, they are treated as two independent licenses, each with its own set of regulatory requirements, further complicating matters.” he added
Discrepancies like these, a lack of a clear, coherent approach to what data should be collected from payers, inhibits further growth and the existence of a fully open financial services environment.”
Even if, according to a recent analysis, API accessibility in Europe has greatly increased in 2021, there is still a lot of room to eliminate friction and enhance the customer experience. For example, there has been a downtrend in innovation because of outdated European regulations governing contemporary APIs, many of which require burdensome procedures during user authentication.
Switching to Apps and other Payment Avenues
“Though the goal is to bolster security, the problem lies with user expectations on usability.” As a result, they discourage users who switch to other payment avenues and apps,” Galdikas explained.
Author bioPayment industry guru Taylor Cole is a passionate payments expert who understands the best ecommerce merchant accounts for small businesses. He also writes non-fiction on subjects ranging from personal finance to stocks to cryptopay. He enjoys eating pie with ice cream on his backyard porch, as should all right-thinking people.