Payments market in 2018: an exciting year!

Since the 1970s, Belgian banks have been developing – through efficient interbank cooperation – innovative payment services tailored to fit the needs of both individual consumers and businesses. In those days, technology was particularly designed to automate and optimise processes. Today, however, it is considered as a catalyst for innovation, as well as a major competitive asset.

The development of new technologies has opened the market to non-banking players: start-ups or fintech companies, which, given their small size, are able to move fast and to quickly develop user-oriented services and solutions. Moreover, banks are facing strong competition from major global players such as the so-called GAFA (Google, Apple, Facebook and Amazon), with substantial financial resources but also a very high level of market penetration.

The new payment services directive (PSD2) enters into force in early 2018. PSD2 will open up the market to said new entrants, promote competition and technological innovation and encourage the development of new services.

For banks within the scope of these new rules, competition will be tough. However, there will be many opportunities to be seized for those who join the right alliances and work together, for those who build on their experience and expertise in payments, but also build on public confidence in the services they offer. 

The high competitive intensity will force every bank to review its services and business models in order to identify opportunities. Not only banks, but also new players will have to rise to the challenge and comply with new rules. Today, Third Party Providers (TPP) are not subject to any regulation yet. However, if they want to start providing services with regard to payment initiations or account information, they will require authorisation and supervision from a competent authority, in the same way as any other payment service provider. Moreover, they will have to comply with the various rules the European Banking Authority imposes, particularly with regard to security.

Banks are thus faced with many challenges and new players face regulatory obligations that are new to them. But the reality of payments will also change for the users: they will have to choose from a broader and more diverse variety of services, keep an eye out for security threats and control the access they give to new players.

2018 promises to become a busy but exciting year! PSD2 brings opportunities for both traditional and new players: everyone should seize the opportunity.

2018 will equal challenge!

Anne Demelenne, Manager Payment Systems @ Febelfin