The aim of Directive (EU) 2015/2366 on payment services in the internal market ("PSD2"), which came into force in January 2018, was to create a harmonised European market by strengthening the security of online payments while fostering innovation through competition between payment players. PSD2 is considered as a true revolution in the European regulation for payment services and electronic money, but it nevertheless needs to be modified and modernised to mitigate risks and adapt to new developments and market growth. The European Commission has therefore presented new proposals to strengthen consumer protection and stimulate innovation. These proposals directly affect marketplaces to continue delivering a smooth and secure payment experience. Get an overview of the 3rd Payment Services Directive ("PSD3") and the new Payment Services Regulation (“PSR”) in this article.
PSD3 and PSR: what's it all about?
The proposals for the third European Payment Services Directive ("PSD3") and Payment Services Regulation (“PSR”) were published on June 28, 2023. These two pieces of legislation should shape the next phase of Open Banking - the sharing of banking data with fintechs in particular - and aim to correct the weaknesses of PSD2. Through PSD3 and PSR, the European Commission aims to "bring payments and the wider financial sector into the digital age." The European Commission's proposals are a response to the boom in electronic payments, new digital players, and the increased risk of fraud associated with technological progress.
Main new features of PSD3 and PSR
PSD2 initiated Open Banking, allowing third-party payment service providers access to customer banking data to foster innovation and competition. Since then, the payment services market has significantly evolved, and the number of electronic payments has increased (reaching a value of 240,000 billion euros in 2021, compared with 184,200 in 2017). This intensification – which is also the result of the Covid-19 pandemic - is accompanied by new providers who have entered the market by exploiting these open banking services. In tandem with these developments, various fraud techniques have emerged in recent years. Increasingly sophisticated, they justify the need for regulatory changes.