2022 denotes the deadline for implementation of PSD2 regulation — or Payment Service Directive 2nd edition for the EU companies. This document encompasses a wide range of policies and requirements for regulating all aspects of financial services in the EU. However, this document contains a ton of acronyms like SCA, and understanding them is essential to reap the full benefits of PSD2 compliance for your products and services.
Covery is enterprise-grade risk management and fraud prevention platform, which is ISO 27001, GDPR, and PSD2 compliant. In this article, we share our insights and explanations of the most widely used PSD2-related acronyms. The full text and official terms can be found here, we provide their humanely-understandable explanations.
What is PSD2 regulation?
PSD2 requires all financial service providers like banks to provide transparent and open access to their customers’ payment information to PSPs or payment service providers. This is needed to support the Open Banking paradigm, increasing the security of transactions and reducing the risks of fraud.
Naturally, such financial details are highly sensitive, so channels to exchange such data should be securely encrypted. Depending on the nature of services provided, different parties have different responsibilities in ensuring PSD2 compliance.
What are AISP and PISP?
As those are the two most important types of entities covered by PSD2 regulation, we will cover them in more detail below.
- AISP stands for Account Information Service Provider. These entities can read the customer’s payment details but cannot initiate payments themselves. They can, however, pass the needed information to TPPs or Third-Party providers, who can initiate payments on the customer’s behalf.
- PISP stands for Payment Information Service Provider, which is an entity able to initiate a payment on a customer’s behalf from one payment processor account to another.
What is an ASPSP?
This term stands for Account Servicing Payment Service Providers, which includes banks and other financial institutions that provide and manage payment accounts.
What is PSU in PSD2?
PSU is a Payment Service User, meaning any entity legally available to access payment accounts and initiate or receive payments through a customer dashboard or an API.
What are PSD2 codes?
There are many more terms and acronyms like QWAC, eIDAS, and QSEAL, but these refer mostly to technical aspects of API interactions. Their exact meanings can be found within the aforementioned PSD2 regulation text. Below we cover the three most important terms for entrepreneurs:
- API — Advanced Programming Interface, is the means for various software tools to interact with each other, exchange information, or invoke certain actions.
- TPP — Third-Party Provider — any entity within the AISP/ASPSP/PISP scope, which uses customers’ payments details to access their accounts and initiate payments on their behalf.
- TSP — Technical Service Providers — companies that don’t provide open banking services themselves, but are hired by AISPs and/or PISPs to deliver Open Banking products with APIs built with PSD2 compliance.
These three are the key players in the financial services field described by the PSD2 regulation. Any company can become a TPP or TSP, and develop APIs to augment the existing range of financial services and create new products that will bring more value to customers, making the Open Banking paradigm a reality.
Conclusions
PSD2 regulation is a complex multi-level code encompassing all aspects of security, fraud prevention and transparency of financial transactions in Europe. However, PSD2 compliance is also essential for companies doing business with EU citizens, be they from Canada, the US, Australia, or Asia. The best way to secure your bottom line and ensure PSD2 compliance is to use a fraud prevention tool that provides such capabilities off-the-shelf.
Covery, an enterprise-grade anti-fraud system, provides a wide range of fraud prevention, risk mitigation and chargeback management capabilities. From automated KYC\AML checks to device fingerprinting, behavioral analysis, and supervised Machine Learning capabilities coupled with a rule-based risk logic engine — Covery provides a reliable anti-fraud solution for businesses and organizations of any scope. Order a free demo to see the full range of fraud prevention capabilities Covery can provide for your business!