Directive points retailers to mobile payment future
Payments European legislation aims to foster competition in payment services with widespread adoption of mobile payment, through technical standards, security and lower costs.
The trend towards paying for everything with a few taps on a smartphone is set to accelerate when the European Revised Directive on Payment Services, better known as PSD2, comes into force.
The aim of the directive is to promote new methods of payment by the Internet by standardising procedures over Europe, encouraging competition and introducing higher security standards.
Tom Ironside, Director, Business and Regulation at the British Retail Consortium, welcomes the directive. "The objective with PSD2 is to get true interoperability between Europe and the UK with much more consistency of standards," he says. "It will promote innovation and make it easier to make payments across borders."
The main impact is the relaxation of constraints on competition in Europe. "For retailers, what it is really saying is let's take away all the rules that limit competition at the moment and make the development of new payment methods difficult to achieve," Ironside explains.
However, the full impact of the directive will not be known until it is clearer how it will be interpreted in the UK, especially in as far as it relates to the interchange fee regulation that came in in December, which made transaction costs more predictable.
One area of concern is new consumer rights such as unconditional refund, however small.
"Retailers have seen a very large increase in the number of queries and chargebacks for very low value transactions," he says. "It may cost more than £20 to process a refund on a £2 transaction."
PSD2 contains provisions for more information that would provide a better audit trail. "PSD2 is helpful in that it demands the provision of more information on the payment, but it is up in the air as to whether retailers will have access to that," Ironside says.
In the longer term, PSD2 may spark fundamental changes in the ways we pay for things in shops, Ironside believes.
One of the main aims of PSD2 is to promote new mobile payment technologies, making transactions easier and more secure for consumers and traders alike. Contactless cards and smartphone apps are already gaining popularity, and their arrival will enable even more fundamental change in the way we pay for stuff.
One is the so-called payment initiation service providers, which provide apps enabling shoppers to pay direct from their bank account instead of through a card provider. "Retailers need to know how this would work and if it would make things easier for customers at the tills but there is a lot of interest in the idea."
The increasing need for security may also make it desirable for customers to identify themselves before they get to the till rather than afterwards, when it comes to the time to pay up.
"It will force retailers to look at customer engagement," Ironside believes. "At the moment we do the payment right at the end - that is what we have always done, but perhaps we should do the verification first, then pay."