PSD3 - the next step in the evolution of European payments
- Sector:
- Financial Institutions
Overview
On June 28, 2023, the European Commission published the highly anticipated Financial data access and payments package, which will, among other things, replace the existing Payment Services Directive (PSD2). Since the introduction of PSD2 in 2015 (implemented in Austria by the Payment Services Act 2018), the payment market has undergone significant changes globally and in Europe. Which changes does the Commission now propose in order to meet the challenges of digital payment transactions?
First off – the new regulatory proposal brings less radical innovations than a fine-tuning of the existing regime. The focus is on four objectives, which we will present to you in more detail over the next few weeks:
- Improving consumer protection (fraud prevention and security)
- Increasing the competitiveness of open banking services
- Increased harmonization and enforcement of the regulatory framework
- Increased access to payment systems and accounts for non-bank payment service providers
Key draft legislative acts - PSD3 and PSR.
Essentially, the Commission proposes to amend and modernize PSD2 with a new Payment Services Directive (PSD3) and to introduce a directly applicable regulation on payment services, the Payment Service Regulation (PSR). The aim is to ensure that consumers can continue to make safe and secure electronic payments and transactions in the EU, whether domestic or cross-border, in euro or other currencies. At the same time, it aims to protect consumers' rights and increase the choice of payment service providers in the market.
The Commission also presents a legislative proposal that sets out the framework for access to financial data. This framework aims to establish clear rights and obligations for the exchange of customer data in the financial sector beyond payment accounts. In practice, this should lead to more innovative financial products and services for users and stimulate competition in the financial sector.
Regulatory content of PSD3 and PSR.
A large part of the existing provisions of PSD2 will be embedded in the PSR to achieve a higher degree of harmonization and minimize differences in interpretation in the individual member states. Among these are the regulations on payments and authorization requirements. Like the Capital Requirements Regulation (CRR) for banks, the PSR will be directly applicable as a regulation in all member states.
In contrast, the PSD3 will retain the authorization requirements for payment service providers as well as their supervision, just like the Capital Requirements Directive (CRD IV) for banks. As a directive, PSD3 must be transposed into the respective national law by the member states to become applicable.
In addition, the E-Money Directive will be integrated into PSD3 to align payment institutions and e-money institutions. Both will be covered by the term “payment institution” in the future.
PSD3 and PSR also form another building block of the Commission's retail payments strategy and complement the Commission's 2022 proposal for a regulation concerning instant payments.
What is the next step?
No concrete timelines have been set yet. In the next step, the draft package will go through the review process of the European Parliament and the European Council. Following the usual legislative procedure, the final versions could be available by the end of 2024. As member states are generally granted an 18-month transition period, PSD3 and PSR could likely enter into force in the course of 2026.
Please note: This blog is for general information purposes only and in no way constitutes legal advice from Binder Grösswang Rechtsanwälte GmbH. The blog cannot replace individual legal advice. Binder Grösswang Rechtsanwälte GmbH accepts no liability of any kind for the content and accuracy of the blog.