The Payment Services Directive is one
of the most talked-about pieces of regulation in recent times and
its impact on the payments industry is yet to be fully gauged.
However, as Victoria Conroy
reports, industry professionals have mixed feelings over the
intended aims of the directive and whether they can be fully
November 2009 saw the Payment
Services Directive (PSD) being implemented across several European
markets, but its reception among the financial services industry
has been mixed to say the least.
A new market intelligence report, commissioned
by financial news distributor Finextra in conjunction with global
money transfer provider Western Union, gives further weight to the
ambivalent attitudes of many in the payment industry. Published in
December 2009, the report surveyed payment professionals at several
European banks to gauge the industry’s opinion of the PSD and how
it will affect their business. The survey sought to examine:
• How the market will react to new payment
institution (PI) entrants;
• What partnership opportunities will the PSD
introduce, if at all;
• What impact the PSD will have on the retail
• How the industry views future challenges
related to the PSD.
The geographical split of respondents was
roughly equal. Over 45 percent of respondents came from Northern
Europe, 21.5 percent each from Southern Europe and Western Europe
respectively, and 12 percent from Central and Eastern Europe.
Appetite for partnership
The results of the survey show a
growing appetite within banks for partnership opportunities with
the new PIs, but also highlight that many banks, whether they are
domestic, regional, or global, still see competition and/or
synergies coming from within the traditional bank environment. A
large percentage of organisations that do not currently offer
remittance services, but plan to, are looking to partnerships in
the post-PSD marketplace.
Key findings from the survey were:
• 38 percent of banks surveyed viewed the
introduction of new PIs, established by the PSD, as an “opportunity
to form partnerships”.
• 34 percent saw “marginal or no competitive
threat” from new PIs. More than half of the banks surveyed, 55
percent, felt that foreign and international banks posed “the
biggest competitive impact post-PSD”. These results may reflect how
the market will react to the PSD, but they also indicate the
banking community has failed to see beyond other banks as any kind
of competitive threat.
• 63 percent said they would become or remain
a full payment service provider as a result of the PSD.
• 52 percent said they do not offer specific
products targeted to the migrant sector.
• 60 percent of participants already offer
• 60 percent of those who were interested or
who were planning on offering remittance services were “unsure” of
what products to introduce.
• 47 percent of those who already offer
remittance services claimed they were not looking for nor needed to
partner with a PI in the post-PSD environment.
• 40 percent of those that plan on offering
remittance providers either plan to partner with a remittance
provider or partner with a bank.
The question of whether payments processing would continue
to be part of organisations’ core business going forward drew an
emphatic positive response from survey respondents. Only four out
of 102 respondents said that payments would no longer be a core
part of their business going forward as a result of the PSD. Out of
those four, three said they will partly outsource payments value
chain activities. They all said they are not interested in offering
In addition to the more traditional
transactions, such as online payment providers and remittance
service providers, new competition will come from retail sectors
such as supermarkets, which will be eligible to offer payment
Foreign banks represent a
In response to the question of where
the highest competitive market impact would come from as a result
of the PSD, an overwhelming 55 percent of those surveyed
anticipated that the highest competitive impact will come from
foreign and international banks.
The PSD is a European directive, but many
banks view its introduction as an opportunity for large,
multinational banks to increase their payments and remittance share
However, these findings can also be
interpreted as showing lack of foresight on behalf of the banks.
Banks are still looking inwards, within the traditional banking
community for any incoming competition. Traditionally, bankers tend
to focus more on the traditional products such as loans, deposits,
trading, and mergers and acquisitions.
In sharp contrast, only 4 percent saw
competition coming from remittance providers (such as Western
Union) and only 6 percent saw it coming from the retail sector such
as supermarkets and retail chains. The lack of concern, especially
in regards to retail sector entrants, is startling, especially amid
such high-profile bank services from the likes of supermarket giant
Tesco in the UK or France’s Carrefour.
Understandably, the new category of PIs is
viewed with some wariness by a proportion of respondents, but 38
percent see the PSD as introducing an “opportunity to form
partnerships.” Of those, 77 percent of the banks that saw it as an
opportunity to partner were from Northern or Western Europe, which
amounted to slightly more than the 61 percent of total respondents
from these regions.
The next battleground surrounding perceptions
of the PSD again concerned the new competitive marketplace. While
34 percent of those surveyed saw the new PSD environment offering
“marginal or no competitive threat” to their existing business, 16
percent anticipate a “serious competitive threat” from new PIs. By
contrast four percent felt the PSD will have “no impact” on the
current competitive environment.
Opportunities for remittance
Considering that 38 percent saw the
PSD as an opportunity to form partnerships with new PIs entrants,
only four percent saw the new environment as a chance to acquire
new payment and remittance providers. All those that saw it as an
opportunity to acquire new entrants were large UK or Spanish banks
that already offer remittance services.
In terms of payments processing, when asked which
strategies will be most relevant for respondents as encouraged by
the PSD (and SEPA), enhancing or increasing their own internal
payments business was the main strategy of those surveyed when
looking at the impact of the PSD.
However, online and e-banking activities
emerged as a strong area for growth among those surveyed, with 51
percent saying they would increase focus in this area. However, as
much as 36 percent of participants say their business strategies
will remain unchanged post-PSD.
Outsourcing saw few fans from those banks
surveyed. Only 9 percent planned on outsourcing payments value
chain activities, and no bank planned on outsourcing payments
processing completely.When asked whether their organisations would
offer a specific product/service to target the migrant segment,
most respondents were of the opinion that they had no interest in
doing so. A 2009 report by the United Nation’s Conference on Trade
and Development claimed that migrant remittances to developing
countries amounted to $305 billion in cash globally for 2007, up
nearly 9 percent on the previous year.
According to the World Bank (July 2008) the
international remittance market has increased 63 percent over the
last 5 years (unrecorded remittances can be up to 50 percent more),
with more than $550 billion expected to have been remitted in 2008.
According to the World Bank, the US and European markets are the
biggest source of remittance payments.
The United Nations estimates that 191 million
immigrants worldwide send money to relatives back home. In many
countries around the world, remittances are the most important
poverty alleviation programme and represent a considerable economic
force (up to 10 percent of the GDP in countries such as the
In this survey, the participants were split on
opportunities arising from the migrant market. More than half, 52
percent, said they do not offer specific products targeted to the
migrant sector. Of those offering services targeted specifically at
migrants, only 8 percent were from Northern Europe (as opposed to
22 percent of total responses from this region).
Challenges going forward
In regards to remittances, 84
percent of those surveyed who offer specific products to migrants
already offer a remittance service. The remittance split was more
varied among those that did not offer migrant services. Some 38
percent already offered remittance services, while 36 percent were
not interested in introducing those services.
Remittance services are a large part of the
payments activities already provided by those surveyed, with 60
percent of participants already offering remittances. However, 10
percent of those surveyed were interested in introducing
remittances as a result of the PSD. The remainder were either not
interested in pursuing remittance services or had not considered
offering the service.
Of those who do offer remittance services, 57 percent offer
account-to-cash services, followed closely by 56 percent that offer
cash-to-cash services. Only 16 percent offered only an
account-to-account only remittance service. However, by adhering to
a strict definition of remittance, it could be argued that
account-to-account services cannot be classified as a remittance
service. However, 60 percent of those who were interested or who
were planning to offer remittance services were “unsure” of what
products to introduce.
Out of those who already offer remittance
services, 47 percent claimed they were not looking for nor needed
to partner with a PI in the post-PSD environment. However, for
those that plan on offering remittance services, 40 percent either
plan to partner with a remittance provider or partner with a bank.
The real opportunity for partnership opportunities seems to lie
within organisations that do not currently offer, but plan to,
introduce remittance services.
When asked what their organisations’ main
challenges in terms of the payments industry in the near future
would be, by far most of those surveyed cited cost reduction and
regulatory compliance as the main challenges within the payments
industry in the coming few years.