Study • 17.01.2018

UK retailers unaware and unprepared in the face of Payment Services Directive

Report calls for retail technology vendors to educate retailers and help them innovate

Hand holding credit card over a laptop
Source: panthermedia.net / pressmaster

New research from independent technical consultancy Consult Hyperion and tech PR consultancy CCgroup, reveals that major UK retailers are unaware, unprepared and paralysed ahead of the Second Payment Services Directive (PSD2) set to go live on January 13th.

PSD2 requires banks to grant third-party providers – including retailers – access to a consumer’s bank account to initiate payments and source customer data in a regulated and secure way. Designed to promote competition and innovation in the payments industry, the regulation will have unintended consequences that will reshape the retail sector. With less than a week before the regulation comes into force, the research calls for retail technology vendors to intervene by educating the market and providing the solutions to capitalise on an array of opportunities.

The research ‘Unaware, unprepared and paralysed: retailer readiness for PSD2’ is based on responses from over thirty tier one (turnover above £500m) and tier two retailers (turnover between £30-£500m) in the UK.

Key findings:

Major retailers are in the dark on PSD2

  • 48% are unaware of PSD2
  • 67% aren’t ready to comply with PSD2
  • 32% aren’t aware of the effect on their business

PSD2 is perceived as a threat not an opportunity

  • Only 16% are seeking to ‘take advantage’ of the new regulation
  • Retailers don’t realise PSD2 will change their business 
  • 67% of retailers don’t think PSD2 will have much of an impact
  • Only 16% think PSD2 will have a major impact

Majority of retailers are paralysed 

  • On average only a third of retailers can confirm they’ll take action
  • Around 10% aren’t sure what they have planned
  • However, once PSD2 is explained retailers want to capitalise
  • 94% would like to reduce card fees
  • 74% want to reduce impact of fraud and data breaches

“The impending shift to “Open Banking” through the implementation of PSD2 is one of the hottest issues in banking and payments. However, it seems that merchants and the wider retail technology community are unaware of the regulation and its far-reaching ramifications,” said Tim Richards, Principal Consultant at Consult Hyperion and co-author of the report. “The use of two-factor authentication and access to customer bank accounts will allow retailers to dramatically lower card fees, mitigate fraud and limit the scope of data breaches. But arguably the biggest value is in access to consumer financial data that opens up new ways to do business.”

“With internet players like Amazon already investing in PSD2 related capabilities, if retailers don’t take up the charge, then someone else will,” concludes Richards. Encouragingly for retail technology vendors, when presented with use cases as to how PSD2 could make a positive impact on their business the vast majority of merchants are keen to capitalise on the opportunity. Furthermore, in excess of 60% of merchants do plan to act on PSD2 – they just need some direction.

“There is clearly a knowledge vacuum within retailers around PSD2 and the retail technology solutions available that enable merchants to take advantage of the opportunities it offers,” said Daniel Lowther, Head of Fintech at CCgroup and co-author of the report. “There is a window of opportunity for retail technology vendors to help merchants react to PSD2, while helping themselves win new business. But this window will close fast and current levels of awareness suggest that communications and marketing efforts to date have not resonated with merchants. This needs rapid and urgent attention from CMOs at retail technology vendors.”

The research “Unaware, unprepared and paralysed: Retailer readiness for PSD2” is now available for download.

Source: Consult Hyperion and CCgroup research

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