In this opinion piece, Acheson discusses upcoming regulatory changes in Europe, explaining how trends in payments rule-making may unexpectedly align with those within the blockchain sector.
Europe is close to undergo a huge shift in regulation which will fundamentally change the payments landscape. It’s also likely to offer an unexpected boost to blockchain development.
Let me explain. It all starts with PSD2, a replacement payments directive thanks to inherit force in early 2018, aims to vary the way banks treat data. While that sounds relatively benign, the results are going to be anything but. Under the new rules, banks will need to share client information with licensed third parties if the client asks it to try to to so.
This will allow a broad range of monetary services to require advantage of a crucial asset that so far has been treated as proprietary: customer data.
Obviously, this favors fintech companies quite it does banks, who are being ordered to offer up a crucial component of their competitive advantage (exclusive knowledge of a client’s transaction history and asset distribution) so as to assist disruptors.
It also sheds light on a deeper goal: to market innovation within the payments space, regardless of the cost.
The prevailing view in Europe is that legacy payment rails are holding back growth in commerce and finance. The upgrade began over 17 years ago with the harmonization of financial institution systems and currencies, and reached its peak in 2014 with a huge overhaul of cross-border payments within the ecu Union.
PSD2 is different therein it’s not upgrading current systems. it’s creating new ones. instead of find out the way to make processes more efficient, it wants to rethink how payments are made. And instead of tell market participants what the new system should appear as if , it wants them to work it out for themselves. In opening up access to data, it aims to offer them a strong tool with which to try to to so.
Is this beginning to sound familiar? it’s exactly what blockchain thinkers and doers round the world are working on: the way to use new technologies to not only improve current processes but develop entirely new ones, bypassing legacy systems and unleashing a replacement wave of innovation – and within the process, change how people use money.
Apart from sharing a standard long-term goal, PSD2 also will benefit blockchain projects by broadening business opportunities.
For example, financial institutions could find yourself offering blockchain-based payment services through partnerships. Bank accounts and cryptocurrency holdings might be aggregated on wealth management dashboards. The operations of distributed ledger trading platforms could fundamentally alter if collateral takes on a special form. and therefore the got to protect the freely flowing data could provide fertile opportunities for providers of blockchain-enhanced security.
But zooming out even more, a stronger symbiosis emerges. Why are Europe’s financial regulators so keen to kick payment efficiency up to a replacement level? It’s a part of a much bigger drive, replicated in other parts of the planet , to exchange cash.
Contemporary attempts to exchange cash with electronic payments have encountered significant friction. With more fluid payment systems, however, the barriers lower. Combine that with a good range of applications designed to assist you manage your financial life with only one device, and you’ve got a replacement sort of service that changes how we see finance.
Given its ability to enable services to share data during a relatively decentralized and selectively transparent manner, blockchain technology could find yourself being a part of the animal tissue of the new system. And given its ability to preserve a semblance of anonymity in electronic payments, it could help a wary public to simply accept the benefits of going cashless.
Here’s where blockchain-based services will presumably start to travel mainstream: not in replacing current systems with better processes, but in forming a part of new systems during a behind-the-scenes, non-threatening role.