PSD 2 setting two cornerstone directions
PSD2 brings about several different components making us identify two main areas of investigation: one is access to bank account, the other is strong authentication. The former aspect involves many challenges mainly for banks because they risk becoming a commodity supplier. While they manage the back-end infrastructure, new entrants will be given the opportunity to deliver new payment interfaces and therefore capture the interactions with customers.
Banks have anticipated this and are taking actions to try to preserve their value with their own customers. They are investing a lot in fintech, a wholly different approach to previous years. Banks are now fully aware of the strategic risks they face and see payments as something absolutely critical that drives people to interact with their bank on a daily basis. Banks also have key assets that they can really leverage. First of all, they have a large customer base and they know who their customers are.
Bank-based solutions “digital by default”
Another key asset banks have are the banking apps that most people use these days. These banking apps can be enriched with payment services to further improve the services delivered to end-users. Mastercard encourages banks to provide their customers with such digital services by default.
Banking figures show that consumers check their mobile banking app several times a day, typically to check balance information. Consumers want to be in control. Banks have never had that many interactions with their customers before. Nobody goes to a bank branch anymore except for specialised interactions or products. Instead, people access services from a web browser or from their mobile phone.
Mastercard, serving banks as primary clients, is trying to help them achieve their goals by enabling them to embed card payments in their mobile banking app. The Masterpass solution from Mastercard has been rolled out by many banks in this context. In practice, a consumer would open his mobile banking app, select a card by default and use it for payments, either to make a contactless payment at a POS terminal or to make an ecommerce payments. The mobile banking app enables him to be securely authenticated, avoiding any fraud risks.
Setting up a secure, standardised payments ecosystem as a key driver of growth
Mastercard’s goal is not only to enable banks to deliver secure and convenient payment services in their banking apps. It is also to put an ecosystem in place that enables new players to enter the card payments space in a safe and secure manner.
New entrants are also launching payment apps. Large digital players like Apple, Samsung and Google have already deployed their mobile payment solution in several markets. Large retailers, but also many fintech startups, are also looking to come aboard this space.
In such a context, Mastercard ensures that a secure ecosystem is created to enable such new payment experiences. Concretely, Mastercard enables new players to connect to its network via APIs, enables the digitisation of cards (to be on-boarded in those payment applications) and adapts its product rules to this new environment.
Ensuring the maximum level of security is an absolute requirement in this new emerging world. Through standardisation and by implementing certified processes, Mastercard ensures that new solutions do not lead to a loss of consumer confidence. The Mastercard brand comes with a high degree of consumer confidence that cannot be compromised with.
Strong authentication setting a clear direction for the future
The PSD2 imposes – with some limited exemptions – the usage of “strong authentication”. This concretely means that, when performing a payment, consumers should be securely authenticated by their bank.
To achieve such a goal and to offer a good user experience at the same time, Mastercard invests a lot in biometrics. Using the fingerprint censor on a smartphone or face recognition enables the consumer to be identified securely in a fraction of a second.
About David Dechamps
David Dechamps is Senior Vice President, Digital Payments & Labs for Europe. In this role, he is responsible for the management and development of emerging payment products for the European markets. These include ecommerce, mobile commerce, person-to-person payments, contactless payments and inControl.
Prior to this, David Dechamps was the Benelux General Manager at Mastercard Europe. In this role he was responsible for all sales, marketing and operations in Belgium, the Netherlands and Luxembourg, which included close cooperation with the financial institutions as well as developing new solutions for retailers and cardholders.
Since he joined Mastercard in 2002, David held various positions as Head of Sales Products & Solutions and Vice President Prepaid Product Sales responsible for selling Mastercard’s prepaid solution across Europe.
About Mastercard
Mastercard is a technology company in the global payments industry. We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in over 210 countries and territories. Mastercard’s products and solutions make everyday commerce activities like shopping, travelling, running a business and managing finances easier, more secure and more efficient.
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