Customers want their realtime payments to just work. They don’t care if you are using postal pigeons, blockchain or voodoo magic to make it happen.

Enter PSD2.

13th of January 2018 will see the official arrival of Payment Services Directive (PSD2) from the European Commission across European Economic Area (EEA).The first PSD, introduced back in 2009, resulted in the creation of Single Euro Payments Area (SEPA) in 2014. Banks were forced to standardize and simplify their payment systems, resulting in lower fees and better customer experience.

Better, but not good enough.

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In the year when chatbots, cryptocurrencies, digital wallets and instantaneous transactions are taking hold of the payments space, a variable SEPA transaction time of 1–3 days looks like a dinosaur waiting for a meteor to strike.

Customers expect 24/7 access to their money and ability to spend it instantaneously. Who knew…

PSD2 creates a common legal framework for businesses and consumers when making and receiving payments within the EEA and calls for banks to open up its APIs to third parties vastly increasing competition, quantity and quality of services in the payments space.

New and existing businesses will be able to step in and fix what banks across EU failed to do, either due to being too slow to innovate or simply not willing to talk to each other.This could be one of the most important pieces of legislation that EEA seen in decades — if only there would be a technology to interconnect all the ledgers and enable secure, cheap and fast transactions…

Blockchain.

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Blockchain is the technology that powers cryptocurrencies like Bitcoin, Ethereum, Digibyte, Bytecoin and many others. At first it’s hard to get over the idea that on 22nd May 2010 a software developer by the name of Laszlo Hanyecz paid 10,000 Bitcoins ($41) for two Papa John’s pizzas, what at today’s rate would be roughly 136 million dollars (also known as the “Bitcoin Pizza Day”).

This real world transaction was an important first step in proving the viability of blockchain technology as a facilitator of payments and the meteoric rise of cryptocurrencies is a testament to that. Since then trillions of dollars worth of value has changed hands on various blockchains and there are already over a thousand blockchains with a total market cap of around $800 billion. Year 2018 will see creation of many more.

Blockchain technology solves a critical part required for the success of PSD2, which is removing the settlement risk between parties through Distributed Ledger Technology. It also makes the transaction data easily accessible to all parties with very little effort.

Projects like Stellar and Ripple are extremely well positioned to provide easy and open access for innovative companies to build a new class of products and services.While cryptocurrencies are new, hot and speculative class of assets they are also testing grounds for the blockchain technology that will ultimately enable the practical implementation of PSD2. Cryptocurrencies like Bytecoin and Digibyte can already provide customers with near instantaneous and cheap (below 0.001$) transaction costs, and they will perfectly blend in into the PSD2 as customer facing means of payment.

So don’t be focused on Bitcoin’s price. It will go up and down, and probably crash a few times in epic proportions, but technology behind it will quickly bring about the next chapter of modern, instantaneous and cheap payments to the European continent and beyond.

Blink and you might miss it.

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Originally posted on my Medium