The introduction of SEPA Direct Debit (SDD) as part of the previous European Payment Services Directive (PSD) has illustrated that charitable donations weren't correctly covered by the core guidelines, while the then current practices were suddenly declared illegal (fortunately, and thanks to the collaboration of the Belgian financial institutions, a workable approach was found). Today, we're looking at PSD2, a new and quite a bit more extensive directive, which is somewhere between being defined and implemented. By early 2018, a new set of rules will define how payments can and will work. 

PSD2 is designed to improve customer protection and increase competition and innovation in payments

Traditional payment systems don't always handle charitable donations well, especially online donations. The concept of a donation challenges some of the premises on which financial systems are built: there's no real prior invoice (tough for accounting systems), the identity of the party who executes the transaction is often limited (or in the case of anonymous donations, absent), and there are a set of additional constraints on these payments in the form of tax (benefit) and privacy protection laws.

Charities have often found creative ways around a lot of these challenges, often because the financial partners tend to be flexible for these causes, and often interpret the rules with some latitude. Of course, it's also because the donation business has low fraud statistics and touches on a large section of their consumer/customer base, and it's good brand strategy to help out when you can. But when new legislation directives are implemented, financial institutions loose a lot of their leeway. 

PSD2 offers a lot of opportunities for new financial (types of) players who are pushing the traditional payment providers forward, in many cases faster than they would like. As with SEPA DD, it's important that all parties understand what it means, and start seeing not only the challenges, but also the opportunities. This post tries to give you a quick intro into a wonderful new world of payments. I'll follow up with some specifics later.

First, the hardcore material provided by the EU. You will find it here (scroll down a page or two to find PSD2 material) but bear in mind that these documents are not for the faint of heart. At this moment, EU countries are preparing or passing legislation to harmonise their national laws with PSD2.

Second, I found this report from Finextra and CA a good read for executives. It breaks down the key changes in PSD2 and shares how the various financial partners are handling them. Don't limit this to CFOs, as the directive will have a dramatic impact on all payments -- as the digital evolution continues, charities will see a growing section of their public donation revenue come from channels that are affected and shaped by PSD2.

Third, and although it's target audience is banks, CapCo's excellent summary report translates the fairly complicated PSD2 diagrams into understandable images, pre- and post-PSD2. 

Just like when SDD was first introduced, when a lot of players tried to wait it out, many organisations will be take a conservative approach, expecting their current partners to inform them and handle all the difficulties. But PSD2 is a real game changer, folks, and I can only advise to dive in early. It has the potential of dramatically changing how payments are initiated, registered and paid, and will offer new opportunities for creative fundraising.

Update: +1 for Starling Bank with this summary post