PSD2: Introducing the Next Generation of Banking: An Explorative Study of the Implementation of PSD2

Elise Solberg Hjermann & Christine Marie Aanesland

Student thesis: Master thesis


In 2007 the European Commission introduced the Payments Service Directive (PSD) to increase competition and provide a simplified set of legislations regarding payments services across Europe. However, the technological development created the need for a revised directive and in 13th of January 2018 the implementation process of the revised Payments Service Directive (PSD2) began. With PSD2 the European Commission promotes innovation, transparency, competition and consumer protection, as well as reducing costs and enabling new players known as the Third-party Payments Providers (TPPs) to enter the market. The revised directive will fundamentally change the value chain of the payments service industry and this thesis explores the strategic choices traditional banks face as a consequence of PSD2. This thesis explores the characteristics of PSD2 to determine the potential disruptive impact in the European payments industry and how traditional banks should position itself to meet the changes. The thesis focuses on how the banks may increase their ability to be innovative to cope with the digital competition. Through analysis of the technical architecture, methodology, business areas exposed to increased competition and income and cost structure of the selected banks the thesis aims to answer the research questions of the paper. The disruptive characteristics are analyzed and complemented by innovation theory to evaluate how the banks should strategically embrace innovation through technology, open banking and collaboration to exploit the potential opportunities of PSD2. This thesis is an explorative study with an inductive research approach, building on findings from a literature outline and interview study. The interview study is based on the experiences, knowledge and perception of PSD2 of six participants in the banking and payments industry. It is mainly based on big, traditional banks, but to gain depth to the analysis of the research question, a smaller bank, Fintech company and technological consultant company has been included in the study. The explorative study finds that banks have to make some important strategic choices to face the competitors, and that time is urgent. The banks have to improve their weak spots and focus on digital transformation to become competitive. This involves becoming responsive to changes and utilize the digital ecosystem of open banking to embrace the opportunities following PSD2.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2018
Number of pages183