PSD2

The EU’s Second Payment Services Directive, governing electronic payments and open-banking APIs. Requires banks to provide secure API access to third-party providers, promoting competition, innovation, and transparency in digital finance.

Why it Matters

PSD2 fundamentally reshaped the European payments landscape by breaking down traditional banking monopolies. By mandating that banks open their infrastructure through standardized APIs, it enabled fintech companies and third-party providers to build innovative payment solutions and financial services on top of existing banking systems.

For consumers, this means greater choice in how they manage their money, with services like account aggregation, payment initiation, and personalized financial management tools. For businesses, PSD2 reduces payment processing costs and enables seamless integration of banking services into their platforms.

The directive also introduced Strong Customer Authentication (SCA) requirements, significantly enhancing security for online transactions while balancing user experience. As a regulatory framework, PSD2 has served as a model for open banking initiatives globally, influencing similar regulations in the UK, Australia, and other markets.