The European Union (EU) has put forth a proposal to review and update the Payment Services Directive 2 (PSD2), along with the introduction of a new Payment Services Regulation. The aim is to address the evolving market landscape and technological advancements in electronic payments since the directive’s inception in 2015.
PSD2 serves as the EU’s legislative framework for all electronic payments, encompassing both euro (€) and non-euro transactions. It focuses on consumer protection, transaction security, and the regulation of payment service providers (PSPs) through licensing and supervision. However, the emergence of newer fraud techniques, innovative payment providers, and advancements such as contactless payments, QR codes, and open banking necessitate an update to PSD2.
One of the key aspects addressed in the proposal is the need to combat evolving fraud techniques. While the implementation of Strong Customer Authentication (SCA) under PSD2 has already made significant strides in reducing fraud, new forms of fraud, such as social manipulation fraud, continue to emerge. These evolving threats require additional measures to ensure the security of electronic payments.
Electronic payments play a crucial role in the EU economy, with a total value of €240 trillion in 2021, a significant increase from €184.2 trillion in 2017. The number of cashless payments has also been steadily rising across various categories, including direct debits, e-money transactions, card payments, and credit transfers.
The revised Payment Services Directive and new Payment Services Regulation propose several measures to support fintech innovation and improve the payment experience for consumers. These measures include enhancing open banking functionality to facilitate more efficient and innovative payment services. Additionally, the proposal aims to foster fair competition between traditional banks and over 1,000 non-bank payment service providers, which could contribute to reducing prices in the sector. The rules for approximately 270 e-money institutions and 800 payment institutions would be streamlined, simplifying administrative procedures.
The proposal also seeks to improve consumers’ payment experiences through various measures. Strong Customer Authentication will be made more accessible to individuals with disabilities and those facing difficulties. Moreover, efforts will be made to enhance the availability of cash, provide transparency regarding certain payments (such as ATM withdrawal charges), and estimate charges for transactions outside the EU.
In addition to the revision of PSD2, the EU has introduced the Financial Data Access (FIDA) framework to address the limited access to customer data. The current challenges include divergent interests between data holders and data users, lack of standardization, high costs associated with data sharing, and unclear rules. The FIDA framework aims to create standardized Application Programming Interfaces (APIs) and data sharing rules, enabling customers to manage and control their data permissions more effectively. This will enhance access to a wider range of financial services and products for small and medium-sized enterprises (SMEs) and improve personalized finance management and advice for individuals.
The proposed changes to the Payment Services Directive and the introduction of the Financial Data Access framework aim to foster innovation, enhance consumer protection, and drive economic growth in the EU’s electronic payments sector. The EU is committed to creating a more secure, transparent, and efficient electronic payment ecosystem to meet the evolving needs of businesses and consumers alike.
https://ec.europa.eu/commission/presscorner/detail/en/FS_23_3558