What does PSD2 mean for accountants?

Nov 09, 2017
In Europe today, there are no alternatives to challenge the giant US card schemes. Because of this, getting access to your money can be slow, expensive and restrict cash flow and access to your payment account information for third party providers (TPPs) is cumbersome. David Stapleton explains how the second Payment Services Directive (PSD2) will help.

Historically, accounting software was provided to SMEs by specialist organisations (e.g. Sage and Quicken). It was normal to install and run the software locally for book keeping, accounts and payroll functions. Today, most organisations are adopting a cloud-first approach to IT service delivery. The widespread accessibility to the internet and cloud-based services has opened up opportunities for existing and new entrants of accounting and related services. 

Under the Access to Accounts service requirements, European banks must create an application programming interface (API) that permits a company registered with a competent authority, and with the consent of the customer, to obtain access to the payment account of other European customers. This allows TPPs to directly access a customer’s account, make payment and balance requests and, in doing so, cut out the middle men, like card scheme providers. 

PSD2 provides opportunities for TPP of accounting software. Under the new directive, an SME’s daily transactions can be made available each day to the TPP. The daily transaction details can be received directly from the payment accounts into the accounting software which provides a consolidated financial position on a daily basis. PSD2 will allow SMEs to better manage their cash flow which is widely recognised as one of the main reasons businesses fail. 

Audit services 

Auditors are typically interested in reviewing payment accounts as it often provides evidence to investigate other areas. As a result of PSD2, auditors will be able to avail of accurate and timely payment account data that is made available in a transparent way. They will have access to a system of financial data that is free from human error which should reduce the time taken for conducting audits and reduce audit fees. 

Tax collection 

Governments raise revenue from taxes and unexpected changes in economic activity causes a corresponding change in tax revenues. As the Inland Revenue seek to modernise the PAYE system by rolling out real-time reporting from 1 January 2019, surprises from PAYE revenues will be less likely. Tax authorities should also consider availing of payment account data, and their special powers to gather and cross-check data that is made available through state agencies, and other service providers in the growing API economy. 

Clubs and charities 

The clubs and charities sector are not a priority for European banks. This is a market segment that doesn’t typically borrow, doesn't have large deposits and doesn't normally use or accept credit cards. Social media platforms such as WhatsApp or Facebook (awarded a financial payments service licence by the CBI) are widely used by club and charities. Through social media platforms, clubs and charities can use the payment account data to help manage money and also use the platform to collect subscriptions directly from members. 

There is an opportunity for firms offering accountancy services to leverage the benefits from having access to client’s payment account data and reduce the burden of book keeping and monitoring cash flow. 

A new ecosystem

The new ecosystem brought about by PSD2 will be comprised of not only financial institutions but also retailers, high-tech companies and potentially anything that involves financial information or transactions. In this new ecosystem, APIs will be the new channel for doing business and need to be given that level of attention and importance.

David Stapleton is the Advisory Consulting Director in PwC.