The European Commission has unveiled a set of proposals aimed at modernizing payment services and facilitating the sharing of financial services data within the European Union. These new rules aim to enhance consumer protection, promote competition, and empower consumers to access a broader range of better and more affordable financial products and services while ensuring security and trust.
The payment services market has undergone significant transformations in recent years, with electronic payments in the EU consistently increasing. In 2021, the value of electronic payments reached €240 trillion, compared to €184.2 trillion in 2017, with the COVID-19 pandemic further accelerating this trend. The emergence of digital technologies has facilitated the entry of new providers, particularly those offering “open banking” services, which involve secure sharing of financial data between banks and fintech firms. However, alongside these positive developments, more sophisticated types of fraud have also emerged, posing risks to consumers and affecting trust in the financial sector.
To address these evolving dynamics, the European Commission has proposed two sets of measures:
- Revising the Payment Services Directive (PSD2) and establishing the Payment Services Regulation (PSR):
- Combatting payment fraud by enabling the sharing of fraud-related information between payment service providers, enhancing consumer awareness, strengthening customer authentication rules, expanding refund rights for fraud victims, and making it mandatory to verify alignment of payees’ International Bank Account Numbers (IBAN) with their account names for all credit transfers.
- Improving consumer rights, including cases where funds are temporarily blocked, enhancing transparency on account statements, and providing clearer information on ATM charges.
- Promoting a level playing field between banks and non-banks by granting non-bank payment service providers access to all EU payment systems, subject to appropriate safeguards, and securing their rights to a bank account.
- Enhancing the functioning of open banking by removing remaining barriers to open banking services and granting customers more control over their payment data, thus fostering the entry of innovative services to the market.
- Improving the availability of cash in shops and ATMs by allowing retailers to provide cash services without requiring a purchase and clarifying rules for independent ATM operators.
- Strengthening harmonization and enforcement by enacting most payment rules through a directly applicable regulation and reinforcing implementation provisions and penalties.
These measures aim to ensure safe and secure electronic payments in the EU, domestically and cross-border, in both euro and non-euro currencies. The proposals seek to safeguard customer rights and promote a wider choice of payment service providers in the market.
- Legislative proposal for a framework for Financial Data Access:
- Allowing customers the option to securely share their data with data users (e.g., financial institutions or fintech firms) in a machine-readable format, enabling them to access new, cheaper, and improved data-driven financial products and services (e.g., financial product comparison tools, personalized online advice).
- Mandating customer data holders (e.g., financial institutions) to make data available to data users, ensuring the necessary technical infrastructure is in place, and subject to customer permission.
- Granting customers full control over who accesses their data and for what purpose, building trust through dedicated permission dashboards and reinforced personal data protection in line with the General Data Protection Regulation (GDPR).
- Standardizing customer data and technical interfaces as part of financial data sharing schemes, with participation required from both data holders and data users.
- Establishing clear liability regimes for data breaches and dispute resolution mechanisms within financial data sharing schemes to prevent liability risks from deterring data holders from making data available.
- Introducing additional incentives for data holders to provide high-quality interfaces to data users, including reasonable compensation based on the general principles of business-to-business (B2B) data sharing outlined in the Data Act proposal (with smaller firms paying only cost-based compensation).
The proposed framework for Financial Data Access is expected to drive innovation in financial products and services, enhance competition in the financial sector, and benefit consumers through improved personal finance management, streamlined processes, and easier access to a wider range of financial services for small and medium-sized enterprises (SMEs).
These proposals align with the Commission’s commitment to ensuring the EU retail payments industry remains up-to-date and responsive to market developments, as outlined in the 2020 Retail Payments Strategy. Moreover, they contribute to the establishment of a European financial data space, a key objective set out in the 2020 Digital Finance Strategy. The financial sector initiative also aligns with the broader European data strategy and draws on the principles of data access and processing outlined in accompanying initiatives such as the Data Governance Act, the Digital Markets Act, and the Data Act proposal.
The proposed measures will now undergo further scrutiny and consideration as part of the legislative process.
https://ec.europa.eu/commission/presscorner/detail/en/IP_23_3543