The Revised Payment Services Directive (PSD2) signalled a shift in Europe’s financial landscape. It has reshaped the way financial services operate and paved the way for innovation, competition, and consumer empowerment. At its core, PSD2 is about open banking, a concept that has unlocked unprecedented opportunities for fintech companies, traditional banks, and consumers. With a revised edition of the Directive (PSD3) due to come into effect in 2026, analysing the impact of PSD2 will provide insights on what PSD3 could offer.
PSD2 is a European regulation designed to modernise payment services across the European Union (EU) and the European Economic Area (EEA). Established in 2018, its primary goals are to increase competition by allowing non-bank third-party providers (TPPs) to access customer banking data (with consent), enhance security through strong customer authentication (SCA) requirements and improve transparency and consumer protection in payment services. By mandating banks to open their APIs (Application Programming Interfaces) to third-party providers, PSD2 challenges the monopoly that traditional banks once held over customer data. This creates fertile ground for innovation in fintech, giving rise to the open banking movement.
Open banking is the practice of sharing financial data securely and efficiently between banks and third-party providers through APIs. Under PSD2, consumers can share their banking data with authorised FinTech companies, enabling them to access a wide range of innovative financial services. Open banking has several benefits for consumers. It offers greater control over finances, where consumers can use third-party apps to aggregate bank accounts, track spending, and manage budgets in one place. Better access to financial products enables consumers to compare and access better loan rates, savings accounts, and investment opportunities. Lastly, PSD2’s SCA requirements ensure that transactions are more secure, reducing the risk of fraud.
PSD2 has transformed the finance playing field for FinTech companies, enabling them to compete with established banks. But rather than viewing fintechs as competitors, many banks have embraced collaboration with start-ups. For example, HSBC has partnered with fintechs such as Tradeshift to enhance their digital offerings, balancing scale with innovation. Visa also acquired Tink, an open banking platform that enables financial institutions to build financial management apps. Its API connects to over 3,400 banks, allowing users to aggregate accounts, analyse spending, and make payments. Companies like Solarisbank and Railsbank have emerged as key players in the Banking-as-a-Service (BaaS) space, enabling other businesses to offer financial services without needing a banking license.
PSD2 has transformed Europe’s financial ecosystem. By breaking down barriers to competition and fostering innovation, it has empowered consumers, businesses, and startups alike. With the development of PSD3, the future of open banking in Europe looks promising. PSD3 will further strengthen the open banking framework. The continued evolution of open banking promises to make financial services more accessible, secure, and tailored to individual needs.
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