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Open Banking is not just for Banks

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Maybe the headline should really read PSD2, access to accounts, now more commonly referred to as Open Banking, is not just for banks. It should also be noted that UK open banking, that has been launched with the CMA9, is not the same as PSD2 Open Banking.

So who does PSD2 Open Banking apply to?

Well, PSD2 uses the term ‘Transactional Account’ and in the United Kingdom the Financial Conduct Authority (FCA) defines a transactional account in the FCA handbook as a ‘Payment Account’.

So, what we need then is a definition of a Payment Account, which is covered in the FCA regulation 2 as an account held in the name of one or more payment service users which is used for the execution of payment transactions.

When determining whether or not an account is a “payment account” for the purposes of the regulations, it is appropriate to focus on its underlying purpose.

To establish this, it is necessary to consider a number of factors including:

  • the purpose for which the account is designed and held out,
  • the functionality of the account (the greater the scope for carrying out payment transactions on the account, the more likely it is to be a payment account),
  • restrictive features relating to the account (for example, an account that has notice periods for withdrawals, or reduced interest rates if withdrawals are made, may be less likely to be a payment account),
  • a limited ability to place and withdraw funds unless there is additional intervention or agreement from the payment service provider (this will tend to point more towards the account not being a payment account), and
  • the extent to which customers use an account’s payment service functionality in practice.

Accordingly, “payment accounts” can include, for example, current accounts, e-money accounts, flexible savings accounts, credit card accounts, other running-account credit accounts and current account mortgages. On the other hand, in our view fixed term deposit accounts (where there are restrictions on the ability to make withdrawals), child trust fund deposit accounts and certain cash Individual Savings Accounts (ISAs) are not payment accounts.

So, the first thing to be clear on is that the definition is far wider than just bank accounts. In fact, based on Konsentus’ estimations, there are 9,000+ Financial Institutions in Europe where the regulation will apply, comprising Credit Institutions (banks), Payment Service Providers (PSPs), Electronic Money Institutions (EMIs) and Prepaid Programme Managers. Of course, not all will offer payment accounts, however PSD2 regulation is going to affect a far wider audience than most anticipated.


Types of FIsNumber in Europe
Banks*14,800+ across EU Member States
Building Societies*2UK: 44
Credit Unions*31,548 across EU Member States
Electronic Money & Payment Institutions*4/5UK: 5,500+, EU over 8,800+
Prepaid Programme Managers*6EU: 50+


The next thing to clarify is that it is also not just about consumer products, PSD2 Open Banking requirements apply to business payment accounts as well.

So, what does this mean in reality?

Well, PSD Open Banking applies to pretty much every payment account type, including physical open loop prepaid cards, even those targeted for instance at children, for example, goHenry or travel cards including FairFX and Caxton. Although they may be regarded as not really offering an ‘account’ under the regulations, they offer payment accounts and thus will need to offer open access APIs.

The other slightly unusual aspect of this, using FairFX as an example, is that FairFX is the brand owner, PCT is the Programme Manager, Wirecard Card Solutions is the Issuer. So although the regulatory obligation will fall on the Issuer (Wirecard) they will in turn pass this down to the Programme Manager who will in most cases, but not all, deliver the API solution on behalf of the brand.

But the regulation is even wider, it also applies to all those wallets you might know such as Paypal, Skrill and Neteller, but it also equally applies to lesser known wallets such as Neosurf which look to serve distinct customer segments.

That is not to say end-users today understand this. Which? found that 92% of respondents hadn’t even heard of it. Imran Gulamhuseinwala, head of Open Banking Limited, the non-profit coordinating the system, admits that “it’s going to take a while for us to see really new, very different services.”

Whilst many companies will consider themselves not to be banks, and many may not even consider they have transactional or payment accounts, in reality the new PSD2 open banking access will apply to them. They will need to put into place open APIs that approved Third Parties can access along with a consent and preference management system to manage this access. 

Konsentus provides a SaaS based consent and preference management solution for EU FIs. Brendan has over 30 years’ experience in the UK & international payments industry, having held executive positions in banking, payment & technology companies including Giesecke & Devrient, Bank of America MBNA & the Datacard Corporation.

*Source: FCA Handbook PERG 15 Guidance on the scope of the Payment Services Regulations 2009
*1 https://www.ecb.europa.eu/stats/ecb_statistics/escb/html/table.en.html?id=JDF_MFI_MFI_LIST (excluding the United Kingdom)
*2 https://www.bsa.org.uk/statistics/sector-info-performance/sector-information
*3 http://www.creditunionnetwork.eu/cus_in_europe
*4 https://paymentinstitutions.eu/about-epif/the-payment-institutions-sector/about
*6 Polymath Consulting Analysis

Picture of Brendan Jones

Brendan Jones

CCO, Konsentus

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