[ This article was originally published here ]
If you work in the banking or payments industry, then no doubt you would have heard about the new Proposed Services Directive… also known as PSD3.
But what does the new proposed regulation mean? How does it differ from PSD2? When does it come into force?
We’ve summarised all you need to know below.
What is PSD3?
PSD3 is a proposed set of rules that will regulate electronic payments and the banking system in Europe. This includes non-bank payment service providers (PSPs).
It amends and updates the existing PSD2 framework –with the aim of addressing new challenges and opportunities in the digital payments landscape.
What impact will it have?
PSD2 was a major new piece of legislation so it was inevitable that incremental updates would be required, particularly in the fast-paced banking and finance industry. Industry players continue to innovate at an incredible pace – with recent years seeing strong growth in digital payments and open banking.
And while PSD2 brought about changes and digitization, it also revealed gaps in legislation due to various developments in the market.
PSD3 aims to address these gaps, prevent fraud, and encourage innovation. Financial institutions, banks, and payment processors are advised to proactively explore ways to adapt their systems to meet the requirements of PSD3 once it becomes law in the EU.
Some of the key revisions in PSD3 are designed to:
- Promote fair competition: PSD3 aims to create a level playing field between banks and non-banks. It enables non-bank payment service providers to access all EU payment systems while ensuring appropriate safeguards and securing their rights to a bank account.
- Advance Open Banking: PSD3 focuses on improving the functionality of open banking. It aims to remove remaining obstacles to the provision of open banking services, giving customers more control over their payment data and facilitating the entry of innovative services into the market.
- Enhancing cash availability: PSD3 addresses the availability of cash in shops and ATMs. It will allow retailers to offer cash services to customers without requiring a purchase and provides clearer guidelines for independent ATM operators.
- Improving consumer rights: PSD3 seeks to improve consumer rights, particularly in situations where their funds are temporarily blocked. It also enhances transparency on account statements and provides clearer information regarding ATM charges.
- Streamlining Regulation and Enforcement: PSD3 strengthens harmonization and enforcement by enacting most payment rules through directly applicable regulations. It reinforces provisions on implementation and penalties, ensuring a consistent and effective regulatory framework.
What’s the timeline?
The exact timeline for implementing PSD3 is not yet known, but finalized versions may be available by late 2024.
Once approved, member states will have two years to incorporate the new standard into national legislation. Companies will then have an additional two years to comply with the regulations. This gives businesses within the European Economic Area (EEA) enough time to adapt their systems and operations.
The final word
PSD3 represents the evolution of payment services in Europe and aims to tackle emerging challenges and leverage opportunities in the digital payments landscape.
Through consultation and stakeholder input, the European Commission intends to create a strong framework that protects users, fosters innovation, and ensures secure electronic payments.
The finance industry will need to adapt to these regulatory changes to remain competitive and compliant in the evolving payments ecosystem.
Please contact us if you want to discuss how PSD3 will impact you.
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