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Reconnecting the Dots for the Payment Service Directive 2 - Compatible Asian Financial Network

Author

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  • Choi , Gongpil

    (Korea Institute of Finance)

  • Park, Meeyoung

    (Korea Institute of Finance)

Abstract

Unlike the popular belief, digital transformation mainly gets stymied by legal and regulatory issues related with legacy institutions in Asia rather than technical difficulties. The real challenges triggered by the PSD2 (Payment Services Directive 2) are how the region would overcome the overly fragmented, centralized, and hierarchical legacy framework to allow necessary changes to respond to the digital single market initiatives as promulgated by the European counterpart. The PSD2 is expected to bring about substantial changes in the payment ecosystem by allowing payment service providers to access customers’ accounts and transactions information via API that have been traditionally controlled by banks. This paper suggests an incentive-compatible mechanism design for open collaboration among legacy institutions in the region to help them adapt to the PSD2. As evidenced by case studies in Korea, the Asian equivalent of PSD2 can be implemented and further expanded to create region-wide PCS (payment-clearing-settlement) network by reconnecting the dots of legacy infrastructures. These decentralized, diverse, small payment networks can be further combined with the expanded RTGS-CDS platform to evolve into the next phase of Asian Financial Network.

Suggested Citation

  • Choi , Gongpil & Park, Meeyoung, 2019. "Reconnecting the Dots for the Payment Service Directive 2 - Compatible Asian Financial Network," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 23(3), pages 285-309, September.
    • Handle: RePEc:ris:eaerev:0364
    DOI: 10.11644/KIEP.EAER.2019.23.3.364
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    Keywords

    PSD2; Digital Transformation; Financial Network; Governance; Mechanism Design; Asia;
    All these keywords.

    JEL classification:

    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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