How PSD2 allows all Corporates to benefit from account aggregation
Account aggregation, the process in which data from
the corporate's financial accounts are collected in one place, used to be a nightmare in the past.
Thus, only very large corporates could spare valuable resources and time to collect and consolidate data, often with little or no success. It was an arduous, expensive, and complex process that was only available to a select few.
Then, on the 14th of September 2019, the Payments Service Direct II (PSD2) came into effect to change banking as we know it forever;
every bank now has to share its customers' bank account details to licensed third party providers (TPPs) through APIs. Everyone - even mom-and-pop stores - now can have access to account aggregation services with less effort
A complex problem
Before PSD2, small businesses and corporates had to spend hours logging in and out of accounts, downloading Excels, and merging platforms to access banking information.
To further worsen the situation, despite the hard effort to consolidate the data regularly, details and graphs were always out of date as they could not provide a real-time illustration of the financial data. In a world that is constantly moving and changing there is no time to be wasted on repetitive and meaningless tasks.
Even with automated tools, this was quite an arduous process since each bank needed to be reconciled individually. One alternative was screen scraping.
This solution has a major security concern as the login credentials have to be shared with 3rd party applications. This also constitutes a breach of the agreement with the bank to not provide sensitive information to 3rd parties.
There were also issues with KYC (Know Your Customer). Corporates have struggled to make this process digital, which means transactions take a long time to update and there's no real-time functionality. This causes further issues with fraud, forcing corporates to spend more money on operations.
For years, corporates and clients have been demanding account aggregation services that are intuitive, secure, and frictionless. PSD2 solved this once and for all.
Open Banking and PSD2 now address the problem
Open Banking was introduced to establish a marketplace and stimulate competition between payment providers.
At a high level, The PSD2 directive means that banking data do not belong to banks anymore. Customers can now authorize licensed Third-Party Providers (TPPs) to access their data through APIs that banks are obliged to expose.
Large Corporates and any retailer can now integrate with these TPPs and benefit from account aggregation services.
How a corporate can become a member of the Open Banking movement and adopt the technology then?
With PSD2, corporates can now integrate their treasury systems and ERPs to get real-time information from their banks through APIs.This means they can get instant notifications on account movements, reconcile transactions and complete payments in a much cheaper and faster way. This is just one example; PSD2 also means corporates can gather, structure, and integrate data much more efficiently. They can then use this transaction data to offer loyalty rewards to customers, improve risk management, and offer support at the point of purchase. Real-time treasury combined with data analytics will help corporates with a new enhanced client experience.
There are many issues corporates face when it comes to account aggregation and a seamless process, that PSD2 offers is a step in the right direction. Since it is still a fairly new directive, not many corporates are getting the benefits out of it yet. This offers a large opportunity for early-adopters. The first to adopt Open Banking will be the first to capitalize on its benefits. And thanks to the Account Aggregators such as UNUapi, it’s now easier than ever to get started.
Get a feel of account aggregation with UNUapi.