FULL PSD
What threat does the new EU Payment Directive pose to Russia?
On 13 January 2016, the second Payment Services Directive of the European Union Payment Services Directive revised (PSD2) entered into force. It limits the possibilities of existing institutions and rigidly directs the development of the financial sector in the direction needed by interested parties. Who, how and why wants to gain full control over payments in Russia and how can this be counteracted?
REPLACING THE FED?
The Directive lays the foundation for a completely new financial system. It creates the foundation for replacing the Fed with new payment services. The leverage is the population, as the new services that the directive will allow to create will have attractive consumer characteristics and can become “popular”.
The Directive prioritises service providers, and the system of contractual relations is being changed to cybernetically enshrined rules of interaction established by law.
ARE BANKS NO LONGER NEEDED?
The role of banks is limited to only storing money, as other functions are transferred to intermediaries by introducing two new licences: for payment initiation and for financial information gathering.
Payment initiation service providers provide interfaces for making payments and act as intermediaries between the consumer and the holder of the funding source. These services will have the right to debit funds from ANY account in ANY financial institution without the consent of the latter. Thus, the directive allows a strong player in the global market to completely take control of all payments at the country level.
Account information service providers, at the client’s request, request information about their accounts (for example, balance) from financial institutions and consolidate it in one place.
WHAT ARE THE THREATS?
Firstly, the directive deliberately creates two new licensed services to gain absolute control over the market.
The key words in the information aggregation licence are “on behalf of the client”. Such an order can be included in any general offer, which the end consumer usually signs without reading. For example, the offer of mobile phones, which the user sees when they first turn on the phone and is forced to agree to for further work with the system. Currently, phones based on Apple, Microsoft and Google software are particularly popular in Russia. All three of these corporations are American and they are the ones who can gain control over the payment system in Russia.
Thus, the payment initiation service is incomplete without financial information aggregation. And American corporations can exercise full control over the aggregation of financial information.
Secondly, the directive obliges financial institutions to provide information to financial intermediaries without concluding a separate agreement.
At the beginning of 2017, uniform standards for data exchange with intermediaries will be prepared, which will be mandatory throughout the European Union. What does this mean for Russia? In the worst case, control by information technology will be implemented as a requirement for everyone to use one certification centre and one root security certificate. Considering that other provisions of the Directive imply a solution to payment control precisely by technological means, there is a possibility of collusion between the owner of the Fed’s money and American manufacturers of equipment and operating systems (Apple, Microsoft, Google, etc.).
Thirdly, a common register of payment institutions and their agents will be created in the European Union.
Thus, only market participants with a basic certificate will be able to connect to the system. Technically, it will be most convenient to restrict the connection to DNS servers, which are the basis of the Internet – also only by certificate. This means that without this certificate, it will not be possible to use the World Wide Web. If any party suddenly wishes to selectively disable DNS servers, then Internet access in Russia will be closed and all payments will be stopped. In this way, it will be possible to instantly completely stop the entire financial system of the country from the outside.
Conclusion: the directive, at its final stage of implementation, jeopardises not just the existence of the banking business in Russia, but the entire economy. Kasia Sh.
based on analytics by Alexey Zarin
Tbilisi, 2016