Payment Service Directive (s) – New challenges and opportunities in the second edition
PSD II is the next milestone of the liberalization of European payments
Third parties in European payment transactions are the focus for PSD II.
Access to bank accounts through third parties is possible in future
With the approach of a final version of the second Payment Service Directive (PSD) of the European Commission in the summer / autumn of this year, this will increase the pressure on the banks, to do justice to the current and forthcoming requirements of regulatory mechanisms.
A variety of regulatory measures is dedicated to the liberalization of the market for payments such as the MIF Regulation – Regulation (EU) 2015/751 – to reduce inefficiencies in the European single market for card payments and in future also the so-called Payment Account Directive (2014/92 / EU) for comparability and for facilitating exchange of payments accounts.
The next milestone in regulatory provisions is the second version of the Payment Service Directive and thus follows its predecessor published in December 2007 which defined the legal framework for payments in the EU. Due to its implementation by most participating countries in 2009, there were a number of changes for banks, taxpayers and account holders as well as for new companies entering into the payment business (hereinafter called third-party providers).
Thus PSD I created besides a unified legal framework additional transparency for customers and limited effective maturities for transactions within the SEPA area (under Article 69) to D + 1, which are also carried out in non-Euro member currencies.
The most far reaching was the introduction of so-called “Payment Institutions” which pass through a simplified admission process compared to banks and implement the European settlement of payment services. This is not about banks. These are defined in Title II of the Directive, and subsequently equipped with special authorization and capital requirements as well as safe-guards.
The basic idea of PSD I (and already mentioned in the opening regulations) was to provide liberalized electronic payments with reduced inefficiencies, which appeared from the European Commission’s view, an urgent need: Cross-border Euro payments previously had only a share of almost 2% of Europe’s total level of payments. Further standardization of payments and strengthening of competition within the European Union was the result of PSD II and changed the payment environment sustainably. Even if the technical specifications by the EBA are not yet determined and the final version of the PSD II is not yet available, a similar structure as in PSD I can be seen from the draft.
Third-party payment services will receive greater importance in the Directive. The linkage of these service providers with the payment account of the European taxpayer allows and defines for the first time the terms and conditions of access. Here, the three services for payment initiation, the account information retrieval and query coverage for so-called Payment Instruments are specifically defined. These services have similarities with the on-line banking functions for execution of a transfer and the retrieval of an account statement.
Figure 1: The three roles defined within PSD II provide a level between the bank and the user and so interrupt the direct customer contact
While in PSD I, general payment accounts are still mentioned (which can theoretically be very broad, but in practice include only those accounts that are able to transfer that money), here the PSD II is more specific and focuses on on-line accessible payment accounts. In terms of safety, there is progress: Thus relevant events of the EBA and the users of payment services are to be reported with PSD II. Another new feature is that the payment service provider must identify itself to the institution managing the accounts (Account Servicing Payment Service Provider or ASPSP).
The technical standards which are intended to guarantee a functioning and marketable implementation are, however, not yet defined by the EBA. This will certainly also represent the linchpin of implementation for the banks, but do not govern the complex access to the accounts of the payer.
Already implemented regulatory provisions are an integral part of the payment landscape and, due to their influence in today’s market standard have significant influence. The PSD II as the next regulatory block accordingly has the potential to become the supporting drivers of change in the coming years. For the banks, it will therefore be important to adapt and to identify the implications of the new directive early in order to prepare in a reliable and strategic manner.