From PSD2 to PSD3: What Will Change With the Directive’s Revision?

On May 10, 2022, the European Commission published three consultations that will help shape the regulatory future of payment services and PSPs across the EU and EEA. This marks the beginning of the shift from the Revised Payment Services Directive, PSD2, to its updated version that will tackle the current needs and challenges of the payment industry better.

Read ahead to learn what the published consultations are about and which updates can be expected from PSD3.

Payment Services Directive Consultations 2022

The questionnaires issued on May 10 comprise one public and two targeted consultations. Here’s an overview of their purposes:

1. Payment Services – Review of EU Rules

This consultation is addressed to the general public that has minimum technical knowledge about the payment industry or data access and reuse in the context of open finance. Its goal is to gather evidence on the application and impact of PSD2 and determine whether this legislation remains fit for its purpose.

It also aims to inform the Commission’s work on open finance to potentially develop a broader framework that will enable customer data beyond the scope of PSD2 to be shared and reused by financial service providers for creating new and improved services, subject to customer agreement as well as the effective application of data protection rules and security safeguards.

The consultation period ends on August 2, 2022 (midnight Brussels time).

2. Review of the Revised Payment Services Directive

It’s a targeted consultation that gathers insights from professional stakeholders, such as individuals and organizations that have more technical knowledge in the field of payments, namely:

• PSPs
• National and EU authorities
• Regulators
• Payment experts

The goal of this review is to inform the EU Commission on the implementation and influence of PSD2 with regard to factors like:

• Latest developments in the payment market
• Evolving payment user needs
• Arising need for potential amendments

The results of this consultation will assist the Commission in assessing the current situation and determining whether new EU policy measures are required.

The consultation period ends on July 5, 2022.

3. Open Finance Framework and Data Sharing in the Financial Sector

The second targeted consultation published on May 10 is also aiming to collect opinions from payment industry experts to gain insight into the views on Open Finance. The questionnaire raises questions regarding critical topics like:

• The relevance of data sharing in the financial sector
• Consumer protection
• Methods of data access and reuse in the financial sector
• Technical infrastructure development

The consultation closes on July 5, 2022, and its results will play a significant role in the EU Commission’s regulatory activities.

Main PSD2 Aspects to Be Reviewed

There are several key factors that make the PSD2 review a necessary measure. They include:

1. Relevance

According to the Retail Payments Strategy published by the EC on September 24, 2020, a PSD2 review is needed to determine whether the directive has achieved its initial objectives and to understand if its content is still relevant for the modern payments market.

2. Scope

PSD2’s review will also address the aspects beyond the directive’s scope, defining whether the exclusions should be updated. This is especially important due to the emergence of new payment service types since the second directive went live in 2015, such as:

• E-money
• Crypto-assets (including stablecoins)
• Digital wallets
• Payment processing variations
• Operating payment systems and schemes
• Buy-Now-Pay-Later (BNPL)

The addition of such payment services to Annex I is sure to broaden PSD3’s scope. However, it is still not clear whether the new directive would regulate the relationships between the PSPs and consumers within these services or only supervise them.

3. PSP Regulations

The licensing of payments institutions (PIs) and third-party payment providers (TPPs), own funds, and safeguarding-related requirements are also subject to review, and so are the provision on liability when PSPs use third parties to provide services and triangular passporting.

4. Transparency

Depending on the results derived from the consultations, there could also be revisions of the transparency of conditions and information requirements for payment services.

New guidelines may potentially be adapted for one-leg transactions for currency conversion costs and execution time to be displayed before a transaction.

5. Open Banking

The current open banking requirements in PSD2 are also likely to be revised. The consultations will also determine whether the way in which consent to third parties accessing payment data and the liabilities linked to it need to be clarified further.

The question of whether the access to payment data via interfaces must continue being provided for free to third-party providers is also under consideration.

6. Execution Time

It is subject to discussion whether the current maximum execution time for payments within the EU requires adjustment. When it comes to one-leg payments, the main questions to consider are:

• Should the maximum execution time for the transaction be limited?
• Is a unique identifier enough to determine the payee’s payment account, or should their name or other data also be required before a transaction is conducted?

7. SCA Application

The consultations are also aiming to determine whether SCA should be applied differently. They look into questions such as:

• Should SCA’s implementation be extended to payee-initiated transactions?
• Do the limits for contactless payments without SCA need to be reviewed?

PSD3: Toward State-of-the-Art Payment Regulations

As you can see, there are many aspects of PSD2 that need to be revised for the regulations to keep up with the payment industry’s developments. The consultations published in May are a big step toward an updated directive, making it safe to assume that the draft of PSD3 could be published already in early 2023.

Selecting a reliable payment platform provider will enable you to stay up-to-date with the upcoming regulations and ensure your operations are in-check and ready for a smooth and timely transition to the new regulations once they are published.

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