With the Second Payment Services Directive (PSD2) set to come into force across Europe on 13 January, new research from independent technical consultancy Consult Hyperion and tech PR consultancy CCgroup, reveals that major UK retailers are unaware, unprepared and paralysed about what it means.
PSD2 requires banks to grant third-party providers – including retailers – access to a consumer’s bank account to initiate payments and source customer data in a regulated and secure way. Designed to promote competition and innovation in the payments industry, the regulation will have unintended consequences that will reshape the retail sector.
With less than a week before the regulation comes into force, the research calls for retail technology vendors to intervene by educating the market and providing the solutions to capitalise on an array of opportunities.
The research ‘Unaware, unprepared and paralysed: retailer readiness for PSD2’ is based on responses from over thirty tier one (turnover above £500m) and tier two retailers (turnover between £30-£500m) in the UK.
And its key findings are alarming. According to the study, major retailers are in the dark on PSD2, with 48% are unaware of PSD2, 67% not ready to comply with PSD2 and 32% unaware of the effect on their business Only 16% are seeking to ‘take advantage’ of the new regulation.
Retailers don’t realise PSD2 will change their business, warns the report, with 67% of retailers saying they don’t think PSD2 will have much of an impact and only 16% think PSD2 will have a major impact on their business.
The majority of retailers are paralysed as to what to do. On average only a third of retailers can confirm they’ll take action while around 10% aren’t sure what they have planned.
However, once PSD2 is explained, retailers want to capitalize on it, says the report, with 94% saying they would like to reduce card fees and 74% wanting to reduce impact of fraud and data breaches.
“The impending shift to “Open Banking” through the implementation of PSD2 is one of the hottest issues in banking and payments. However, it seems that merchants and the wider retail technology community are unaware of the regulation and its far-reaching ramifications,” said Tim Richards, Principal Consultant at Consult Hyperion and co-author of the report. “The use of two-factor authentication and access to customer bank accounts will allow retailers to dramatically lower card fees, mitigate fraud and limit the scope of data breaches. But arguably the biggest value is in access toconsumer financial data that opens up new ways to do business.
“With internet players like Amazon already investing in PSD2 related capabilities, if retailers don’t take up the charge, then someone else will,” concludes Richards.
Encouragingly for retail technology vendors, when presented with use cases as to how PSD2 could make a positive impact on their business the vast majority of merchants are keen to capitalise on the opportunity. Furthermore, in excess of 60% of merchants do plan to act on PSD2 – they just need some direction.
“There is clearly a knowledge vacuum within retailers around PSD2 and the retail technology solutions available that enable merchants to take advantage of the opportunities it offers,” said Daniel Lowther, Head of Fintech at CCgroup and co-author of the report. “There is a window of opportunity for retail technology vendors to help merchants react to PSD2, while helping themselves win new business. But this window will close fast and current levels of awareness suggest that communications and marketing efforts to date have not resonated with merchants. This needs rapid and urgent attention from CMOs at retail technology vendors.”
The research “Unaware, unprepared and paralysed: Retailer readiness for PSD2” is now available for download.