The Impact of Regulatory Changes on Financial Operations

The European financial regulatory landscape is transforming with PSD2 and Open Banking impacting accounts payable and AR practices, necessitating organisations to stay informed, analyse gaps, invest in technology, and enhance efficiency.

FREMONT, CA: The regulatory framework governing financial operations in Europe is currently experiencing substantial evolution. Key initiatives such as the revised Payment Services Directive (PSD2) and the Open Banking standard catalyse transformations directly affecting both AP and AR procedures. Despite the inherent challenges in these shifts, they offer organisations the chance to bolster efficiency, transparency, and security within their operations.

The Evolving Regulatory Landscape

The PSD2 introduces the requirement of strong customer authentication (SCA) for online payments, with the primary objective of enhancing fraud prevention and bolstering consumer protection. Consequently, organisations involved in AP must ensure the alignment of their payment processes with the prescribed SCA protocols. The compliance demands entail additional verification steps during online transactions, potentially leading to a slowdown in the payment processing workflow. Organisations must invest in SCA-compliant solutions to adapt to these changes and communicate the requisite adjustments to their vendors.

In parallel, open banking is a standardised framework facilitating secure data sharing among authorised third-party providers (TPPs). This development creates opportunities within AR, allowing organisations to explore innovative solutions powered by TPPs for expedited receivables collection and enhanced cash flow management. Organisations can streamline the collection process by integrating TPP-based services into their AR systems, paving the way for more efficient and faster payments.

Ensuring Compliance and Adapting to Change

In response to the dynamic regulatory environment, organisations can proactively navigate the implications of PSD2 by adopting a strategic approach. Firstly, it is imperative to stay abreast of regulatory updates, consistently monitoring their ramifications on financial operations. A comprehensive gap analysis is essential to identify potential non-compliance areas within existing practices. Investing in technologically advanced solutions that facilitate Strong Customer Authentication (SCA) compliance and seamless integration with Open Banking standards is crucial. Additionally, building internal capabilities is paramount, involving staff training on emerging regulations and fostering a culture of adherence to best practices for ensuring compliance and efficiency in financial operations. These proactive measures position organisations to successfully navigate and adapt to the evolving regulatory landscape dictated by PSD2.

The European Commission is presently deliberating revisions to PSD2, specifically emphasising enhancing consumer protection and promoting competition within the payments market. Concurrently, the Open Banking Implementation Entity (OBIE) has introduced the most recent iteration of the Open Banking Standard, meticulously incorporating input from industry stakeholders to address evolving requirements. In light of the regulatory environment, organisations can safeguard compliance, seize opportunities presented by emerging technologies, and adeptly manoeuvre through a future marked by secure and streamlined financial operations. Remaining attuned to these developments allows entities to position themselves advantageously in the evolving financial landscape.

Looking Ahead

Regulatory frameworks require organisations to adopt an agile stance in ensuring compliance and readiness for forthcoming shifts. Embracing these evolving dynamics presents opportunities for organisations to fortify security, transparency, and operational efficiency within their financial framework, fostering a competitive edge.