Understanding Amazon PSD2 compliance: What does it mean for merchant finance?

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Amazon are currently working on implementing the PSD2 in way that would lead to successful adoption,” says Igal Rotem, chief executive officer of Credorax.

What is PSD2?

The Payment Services Directive 2 (PSD2) is a European Union (EU) directive aimed at regulating payment services and payment service providers (PSPs) throughout the EU and European Economic Area (EEA). The directive will become mandatory on 14 September 2019.

It works by enabling the UK’s nine largest banks including Barclays, HSBC, RBS, Santander, Bank of Ireland, Allied Irish Bank, Danske, Lloyds and Nationwide to share customer details in a secure form between authorised online businesses. This means increased visibility to the customer information, which builds a picture of a shopper’s financial possessions and spending habits. That is, customer insight on their spending, borrowing and lending history.

Igal attributes the introduction of the legislation to the ability of authorised third parties to access customer data. This will allow third parties to both promote and design various financial products such as loans, money management and payments services. He says that the philosophy behind this legislation is to increase competition and innovation in the market.

How will merchants benefit from the PSD2 introduction?

Pointing to Amazon Pay a service which gives users an option to pay with their Amazon accounts on the external merchant websites, he says that PSD2 will broaden the payments horizon for Amazon. He says that Amazon now wants to offer merchants a new service. That is, an ability to provide a lending solution so that they can support their businesses. Igal says that to do so, Amazon would need to tap into to merchants’ bank accounts. This will allow Amazon to make an immediate decision whether a particular seller is a legitimate window which they can lend a certain amount of money.

How will Amazon benefit from the PSD2 introduction?

Igal says that the introduction of the directive will enable Amazon to give individuals a significant buying power. He describes this as Amazon’s long-term strategy. Igal says that Amazon wants to enable merchants to allow this kind of transactional power without being hit with the risk of the customer not being able to pay for the goods.

Amazon’s third-party sales are already eclipsing the marketplace’s own first-party retail sales revenue. This means that the growth of the marketplace relies mostly on Amazon merchants sales. Amazon are happy to continue this trend as long their commission travels to their pockets.

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