On June 28, 2023, the European Commission released a series of new legislative proposals for some of the most fundamental regulations related to payments and financial services, including the revised Payment Services Directive (PSD3), the Payment Services Regulation (PSR), and the Financial Data Access (FIDA) framework.
These proposals are designed to promote the digital transformation of the industry while prioritizing consumer needs. In this overview, we will guide you through the highlights of these potential updates and explain how such measures could influence the European payments landscape.
Since the EU Commission’s new proposals refer to three different regulatory pieces, it is crucial to understand the difference between PSD3, PSR, and FIDA before delving into the contents of the potential changes. Here’s what these regulations are all about in simple terms:
All of these regulations work together to address specific aspects of the European payment ecosystem and financial data access, ensuring their effective implementation and compliance.
The European Commission conducted a thorough evaluation of the currently effective version of the Payment Services Directive in 2022. This process involved input from the European Banking Authority (EBA), public consultations with both general and targeted stakeholders, as well as an independent consultant’s report, and focused on such aspects as:
This review has revealed mixed results in terms of PSD2 meeting its objectives.
On the positive side, the introduction of Strong Customer Authentication (SCA) under PSD2 has significantly contributed to fraud prevention, yielding positive results in reducing fraudulent activities.
Besides, PSD2 has proven effective in enhancing the efficiency, transparency, and selection of payment options available to consumers, thanks to the emergence of new payment instruments since its implementation.
However, the evaluation also highlighted certain challenges, including:
Thus, based on the evaluation’s findings, the Commission determined that amendments are essential for advancing PSD2’s objectives and promoting a more integrated and competitive European payments landscape.
Similarly, the PSR and FIDA require amendments to ensure that they remain relevant and up-to-date in addressing the evolving needs and challenges of Europe’s rapidly evolving financial sector.
By putting the new legislative proposals forward, the European Commission is fulfilling an important commitment to address existing issues in the local retail payments sector and face up to its emerging challenges, which was outlined in the 2020 Retail Payments Strategy.
The main changes to the existing PSD2 and PSR regulations suggested by the proposals include:
Additionally, the EU Commission aims to enhance the enforcement and harmonization of the updated payment regulations across member states by implementing the majority of rules through the Payment Services Regulation (PSR).
The proposal for the Financial Data Access framework aims to determine clear rights and responsibilities for managing customer data-sharing beyond payment accounts. The key measures suggested by the proposal include:
All in all, the Commission’s suggestions regarding FIDA, alongside the PSD3 and PSR proposals described earlier, have the potential to truly transform the European payment landscape, should they be implemented.
The release of the PSD3, PSR, and FIDA proposals marks the first phase of their journey toward being implemented.
Now, they will have to undergo a rigorous review process by both the European Parliament and European Council. Once it’s complete, the final versions of the documents will be published. Although the timelines haven’t been announced yet, this could be expected to happen somewhere around Q3-Q4 2024.
As for the implementation deadline, member states are typically granted a 24-month implementation period, which would mean that PSD3 and the PSR could come into full effect in 2026.
With this in mind, it is essential that PSPs carefully review the contents of the proposals and adjust their operations accordingly to make sure they are ready for the upcoming changes well in advance.
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