We made a presentation on 8th November 2018 to the Operations conference of the London Association of Foreign Banks on PSD2, focusing on:
- Conduct-of-Business rules
- eBanking security, the EBA Regulatory Technical Standards, the interconnection with Open Banking, and how ASPSPs should accommodate Third-Party Providers
- the obligation of credit institutions to provide accounts and services to non-bank PSPs
On Conduct-of-Business rules, the expansion to “leg-out” payments has made little difference in practice because:
Corporates already had arrangements that mitigated the costs of such payments;
SMEs and consumers have taken to FX Bureau or Money Transmission services that make payments for free or for a very low fee, and presumably swallow their agent charges outside the EEA when the agent treats a payment marked SHA as if it were marked BEN or OUR.
The main work to be done, and by September 2019, is to implement the the EBA Regulatory Technical Standards, be able to accommodate Third-Party Providers, and to migrate any services done under the heading of Open Banking onto the EBA-compliant way of doing the same thing.
Customer take-up of Open Banking has been very slow. The main drivers for use of such a service in the corporate arena are absent in the UK retail space (e.g. no nationwide banks; regulatory limits on service offerings of individual providers).
Credit institutions need not worry too much about being forced to offer accounts and service to non-bank Payment Service Providers. Any excuse like “outside target market” or “too expensive to expand our service range” seems to wash with the FCA and PSR, whose stance in practice is light years away from the laws on which their stance is based.
If a non-bank PSP has dealings with other countries, the countries can be construed as “High Risk” and the PSP turned away, if the Wolfsberg Group’s FAQs on Country Risk are turned to account. There us sufficient latitude within the range of Wolfsberg-compliant Country Risk Profiling to turn away Germany and the USA.
If all else fails there is always the new Wolfsberg Group Correspondent Banking Due Diligence Questionnaire: banking a PSP can be construed as a correspondent relationship, and the new questionnaire – having been extended from 20+ questions to 110+ – gives 110+ reasons to say no.
In sum, it is the issue of EBA RTS and Third-Party Providers that is the big one.