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Payment Service Directive 2

Compliance Consultancy Financial Crime Payment Service Directive 2

The idea behind the Payment Service Directives (PSD) aims at simplifying the lives of European consumers and open the market to new players, thus enhancing competition.

The EU adopted the first Payment Services Directive (64/2007) in 2007. The key topics in the first PSD included the fact that the Payment Service Providers (PSP) must provide clear information to their users prior and after the execution of the service. Moreover, the transactions in EU currencies have to be executed in one working day. The PSPs have to correct the transaction or refund the payer who used the service if the transaction was not completed or was wrong.

The need to answer to a revised technological framework

Since 2007, the technological development and the growth of electronic and mobile payments have underlined the need for a revised legal framework at the EU level. As a result, in 2016, the second Payment Services Directive (2366/2015) entered into force and the member states had to implement it by January 2018. The new directive aims to extend the already existing rules. The second PSD introduced some updates on the first directive:
  • More focus on internet and mobile payments and the protection of consumers financial data.

  • Extension of the scope of the directive to EEA payments and One Leg Out transactions in any currency and not only EEA currencies.

  • Expanding the EU market to innovative payment services and new providers, such as FinTechs. These players are also called third party payment services providers (TPPs). Need for change is becoming more of a reality for banks and new players on the market. Some international banks already invested in FinTechs under the motto "if you cannot beat them, join them". For the consumers, a range of possibilities will arise in managing their financial transactions online. The new players (Account Information Service Providers - AISP, Payment Initiation Service Providers - PISP) and new startups will try to gain market share, offering products that were originally part of the traditional banking system.

  • At the same time, it introduces enhanced consumer rights, including reduced liability for non-authorised payments, removal of surcharges for the use of a consumer credit or debit card and refund for direct debits in euro. Strong Customer Authentification requirements are clearly stated in the new provisions (art. 97 and after), enhancing the protection of the customer and the transactions.

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