Glossary
PSD2
The EU payment services directive that obliges banks to open account data and payment initiation to licensed third parties.
PSD2 is the legislation that made open banking a right rather than a favour. It requires banks operating in the European Economic Area to provide interfaces through which licensed providers can, with the customer's consent, read account information or initiate a payment.
For a lender, two consequences matter. Account data can be obtained with consent instead of paperwork, and strong customer authentication is mandatory for most electronic payments - which is why an applicant is asked to authenticate with their own bank rather than hand over credentials.
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