The bottom line is that implementing the PSD will be a significant programme for a UK bank over the next couple of years.

Terms and Conditions

Time to get the cheque books out for the lawyers. In general the PSD requires banks to change the terms and conditions related to Payment Services. Some of this will be in the bank’s own interest (e.g. clauses specifying the unique identifier required to make a payment).

A payment is considered irrevocable once received by the PSP on day D or for direct debits, the end of the business day before the account is debited. This is different for to current practice in a number of payment areas for many UK banks (e.g. direct debits, credit cards).

There is the ability to opt out of most of the conditions for corporate customers.

Processes and Systems

If the banks lose the argument about when the retailer should be paid for his credit and debit card payments – the whole Merchant acquisition business process would need major re-engineering. (see What is a Merchant Acquirer).

Some work will need to be carried out on some of the FX processes;

• If a customer deposits some foreign currency in a branch, that should be credited to his account the same day; in many banks this is not the case.
• For inward payments (i.e. crediting a customer’s account) requiring FX, the payment and the FX may need to be dealt with on the day of arrival of the payment arriving (in order to keep within the D+3/D+1 execution time). Again some banks currently need an extra day to deal with the FX.

Customer Information processes will need to be reviewed and potentially changed. The PSD requires the PSPs to give payers and payees information about execution time, reference information, charges and FX rates applied to transactions.

Claims and refund processes also need reviewing as the PSD mandates various time limits for how long a customer can wait before he can make a claim and receive a refund after a payment. It also dictates how long a bank can delay refunding a payment because it is investigating the issue (10 days).

Charging processes need looking at – the PSD requires that the amount to be paid is kept intact and any charges are identified separately (hence increasing transparency). The PSD prohibits BEN or OUR type charges so any customer propositions and/or processes involving these will have to be stopped.

Finally, as the move to D+1 maximum execution cycle gathers pace UK banks will have to ensure their payments partners across Europe (correspondent banks, clearing banks and CSM’s) can meet these timescales. This may necessitate changes of payment partners with all the associated upheaval in terms of processes.

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