Decoding PSD2 Directive: A Perspective on Regulatory Technical Standards (RTS)

In the dynamic landscape of financial services, the Payment Services Directive (PSD2) stands as a transformative regulation, aiming to enhance competition, innovation, and security in the European payment industry. 

Central to PSD2's implementation are the Regulatory Technical Standards (RTS), a set of guidelines that play a crucial role in achieving the directive's objectives. In this article, we will delve into the objectives of PSD2, the significance of the RTS, and their implications for various account types, the security of corporate payments, common and secure communication, and the protection of personal data.

What are the objectives of PSD2?

• PSD2 seeks to foster a more competitive and innovative payment landscape by introducing a framework that encourages the emergence of new players, such as third-party providers (TPPs). This promotes increased choice for consumers and businesses alike.
• A paramount goal of PSD2 is to bolster the security of electronic payments. Strong customer authentication (SCA) is a key element, ensuring that electronic transactions are carried out with enhanced security measures, thus mitigating the risk of fraud.
• PSD2 aims to standardize payment services across the European Union (EU) member states. By implementing a harmonized regulatory framework, the directive seeks to create a level playing field for all market participants, fostering consistency and transparency

Read also: PCI DSS Security Standards Council

What are the objectives of the Regulatory Technical Standards?

The RTS, a set of detailed technical and security standards, serves as the operational backbone of PSD2. It aims to:

1. Ensure consistency in implementation;
2. Facilitate interoperability: 
3. Enhance security measures.

RTS provides a standardized approach to implementing PSD2, ensuring that financial institutions and third-party providers adhere to consistent practices. This consistency is crucial for the directive's success in achieving its objectives.

RTS guidelines are designed to promote interoperability among different payment service providers. This enables seamless communication and collaboration between banks, TPPs, and other stakeholders, fostering a more integrated and efficient financial ecosystem.

One of the primary objectives of RTS is to strengthen security in electronic transactions. By defining detailed technical standards for strong customer authentication and secure communication, RTS aims to safeguard financial transactions from unauthorized access and fraudulent activities.

Read also: Two-Factor Authentication for Software Products

To what type of accounts will this RTS apply to?

The RTS is applicable to a broad spectrum of accounts, including:

• Payment accounts: RTS applies to payment accounts used for executing payment transactions, ensuring that the security measures outlined in the standards are uniformly implemented across various financial institutions.
• Third-party provider (TPP) accounts: As PSD2 encourages the involvement of third-party providers, the RTS extends its applicability to the accounts managed by TPPs. This ensures a consistent and secure environment for all entities involved in the payment ecosystem.

Read also: Everything You Need to Know About eIDAS Regulation

Security of Corporate Payments

The RTS places a significant emphasis on the security of corporate payments, acknowledging the importance of protecting business transactions. By mandating strong customer authentication, secure communication channels, and robust fraud prevention measures, the RTS aims to fortify the integrity of corporate payments, reducing the risk of financial losses and unauthorized access.

Read also: Enterprise Cyber Security: Best Practices

Common and Secure Communication

Ensuring common and secure communication is a cornerstone of PSD2 and, consequently, the RTS. Standardized Application Programming Interfaces (APIs) facilitate secure communication between banks and third-party providers, creating a transparent and interoperable environment. This not only enhances the efficiency of payment services but also fosters healthy competition and innovation within the industry.

Read also: Key Steps to Improve Cybersecurity in Healthcare

Protection of Personal Data

Recognizing the sensitivity of personal data in the financial sector, PSD2 and the RTS prioritize the protection of personal information. The standards set forth by RTS mandate the implementation of robust data protection measures, ensuring that the sharing of sensitive information is conducted securely and with the explicit consent of the account holder.

Read also: Best Practices of Security & Protection of Mobile Applications

PSD2-Compliant Software Development

As businesses navigate the complexities of PSD2 and the associated regulatory standards, understanding the underlying goals is imperative. Increasing competition, improving safety and standardizing practices are at the forefront of PSD2's goals, and RTS serves as a guiding framework for their implementation. SDH company's expertise in working with compliant projects allows us to create products in accordance with standards. 

By applying these standards to a variety of accounts and focusing on security, communications, and data protection, businesses can ensure maximum data protection and performance. Drop us a line to get an estimation of fintech product development! 

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