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Neil Burton

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Neil Burton - Verifone

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Payments strategies 2015-2020-2030

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PSD2 is published

26 July 2013  |  8761 views  |  0

The European Commission (EC)’ s  long awaited proposal for a revised Payment Services Directive (PSD2) published on 24 July 2013, has been overshadowed by its proposal for the regulation of Multilateral Interchange Fees (MIF), announced concurrently. PSD2 has some very significant content.

The PSD established a legal and regulatory framework for payment services providers, enforcing a number of protections for their clients such as safeguarding of funds; and required them to execute processes in accordance with banking regulations, such as KYC and AML. It has already resulted in significant progress regarding the integration of the European retail payments markets. According to Commission sources, there are now 568 Authorised Payment Institutions (API) in the EU, and 2000 registered PIs (smaller firms) across the whole EU. Of this total, the UK has 316 APIs and 903 registered PIs.

PSD2’s goals are to allow consumers and merchants to benefit fully from the internal market, particularly in terms of e-commerce, promote more competition, efficiency and innovation in the field of e-payments, a downward convergence of costs and prices for payment services users, more choice and transparency of payment services, facilitating the provision of innovative payment services, and to ensure secure and transparent payment services.

It is a Directive, which means it has to be approved by the European Parliament, and then transposed into law in each Member-state; so it has little chance of coming into force before the SEPA end-date.

It seeks to iron out a number of the inconsistencies which have occurred through different interpretations of the PSD at Member-state level, and also widens its scope in a number of ways:

  • The challenging issue of OLOs (one leg outs) is addressed - the PSD’s provisions on transparency and information requirements will apply to payment transactions to all countries (previously only EU).
  • Unexpected lifting fees:  payment service providers and any intermediaries must transfer the full amount of the payment transaction and refrain from deducting charges from the amount transferred.
  • FX transparency: Where a currency conversion service is offered prior to the initiation of the payment transaction and where that currency conversion service is offered at the point of sale or by the payee, the party offering the currency conversion service to the payer shall disclose to the payer all charges as well as the exchange rate to be used for converting the payment transaction.
  • Scope of applicability of legislation is broadened:  extends the application of transparency and information provisions to transactions in all currencies between payment service providers that are located within the EEA (previously EU).
  • Firms specialising in certain parts of the payment process which were previously exempt, (such as OBePs) are brought into scope.
  • Fair access: For payment institutions to be able to provide payment services, it is indispensable that they have access to payment accounts. For example where a designated payment system allows a payment service provider to pass transfer orders through the system via a direct participant, such indirect access to the system services shall also be provided to other authorised or registered payment service providers.
  • Network and information security: Payment service providers will have to comply with new risk management and incident reporting requirements, and strong customer authentication in the new draft NIS directive.
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