Welcome to the UBER world of the IFA.
Soon everyone will be a banker, using API to manage other peoples money!
PSD2 will strengthen the pure play fee based adviser further against the provider owned IFA practices that remain hooked on commission and cross subsidy. It could also negate any desire for IFAs to become DFM firms.
There are two versions of the PSD2, Account Information Services and Payment Initiation Services. Advisers should be encouraged to apply to the FCA for change in permission in due course. The directive takes effect from January.
Account Information Services
Under PSD2 an ‘account information service’ is an online service which provides consolidated information on payment accounts held by a payment service user with payment service providers. These services already exist in the UK, however, PSD2 will bring them within the scope of regulation; ensure that AISPs can receive access to payment accounts and place requirements on them to ensure security for users.
This service may be popular with software providers. But the second option will be more popular with high end IFAs, because the IFAs will be able, if they secure the authorisation with the FCA, to manage the customer’s own bills and banking – and by extension pay their own fees, by third party access to the client bank account. The minimum capital adequacy for this activity is EUR50k.
Payment Initiation Services
Under PSD2, a ‘payment initiation service’ is an online service which accesses a user’s payment account to initiate the transfer of funds on their behalf with the user’s consent and authentication. Payment initiation services provide an alternative to paying online using a credit card or debit card.
These services are not widely used for online payments in the UK, but are used in other European countries. The new rules will bring payment initiation services within the scope of regulation; ensure that PISPs receive access to payment accounts and place requirements on them to ensure security for users.
If you would like to look at changing your permission to include this service for your clients, please contact us.