PSR & PSD3: Are you ready?

February 12th, 2024

On June 28, the European Commission unveiled a revision of the PSD2 (2nd Payment Services Directive) to modernize the current directive. This revision also introduces a new Payment Services Regulation (PSR). Their shared objectives? To enhance innovation and service offerings by expanding data sharing and improving consumer protection.

PSR - PSD3: A Closer Look at the European Commission's New Proposals 💡

The regulatory framework for payments is built upon PSD2, which was enacted in 2018. While it sought to strengthen online payment security and lay the groundwork for Open Banking, it also revealed certain limitations and inconsistencies.

Simultaneously, electronic payments have experienced significant growth, and advancements in data sharing and technology have led to innovations in the sector. However, these developments have paved the way for increasingly sophisticated fraudulent techniques. This has prompted the drafting of new proposals to harmonize the market and safeguard consumers.

These new texts are part of a broader initiative to innovate and enhance financial services to better cater to the unique needs of users and organizations. The PSR and PSD3 proposals encompass several key themes: reducing fraud, streamlining, and standardizing the regulatory framework, improving Open Banking, fostering fair competition between banks and PSPs, and facilitating liquidity availability.

Here are a few additional details:

Less Fraud

In response to the rising trend of online payment fraud, PSD3 seeks to implement innovative solutions. These include increasing consumer awareness, enhancing customer authentication procedures, and verifying systems (matching IBANs to account names for each transfer). The objective is also to extend refund rights for fraud victims and improve the exchange of fraud-related information among payment service providers. Additionally, the new directive aims to eliminate outdated processes (like cardless bookings) and introduce new secure methods such as "Link to Pay." PSD3 places a primary emphasis on creating a safer and more resilient environment. However, due to local interpretations, this significantly impacts regulated payment institutions, including compliance costs, additional technology investments, and adaptation across different European markets.

From Open Banking to Open Finance: 

The 2nd Payment Services Directive mandates that banks allow their customers to share data with third-party providers through APIs, known as Open Banking.

What are APIs?

APIs are rules facilitating interactions between computer systems, enabling access to various services like balance inquiries and transfer initiation.

Ensuring the performance and efficiency of APIs is crucial for effective data-sharing management.

To promote the development of innovative services, the Commission aims to extend Open Banking to the financial sector (Open Finance) beyond payment accounts. This could lead to even more personalized services like savings and credit solutions.

The goal is establishing a well-defined framework with rights and obligations regarding customer data dissemination in the financial sector. For customers, this means the possibility of sharing their information with financial institutions or fintech companies to access new, innovative, personalized products and services at competitive prices, including tools for product comparison and tailored advice.

For their part, holders will be required to set up the necessary technical infrastructures (high-performance APIs) and, with the customer's authorization, make this data accessible to data users.

PSD3 and PSR will introduce higher levels of regulation. Consequently, consumer confidence and certainty in Open Banking and Open Finance services are expected to rise, boosting adoption, and encouraging continued industry development of new services.

FiDA (Financial Data Access) emerges as a critical framework in this evolving landscape. FiDA extends the concept of Open Data beyond banking, encompassing various financial products and services. It aligns with the broader effort to integrate new data sources, such as health data.

FiDA represents a vital step in fostering innovation and consumer confidence. Alongside PSD3 and PSR, it paves the way for a wide range of financial services and products while ensuring their security and reliability.

Building Trust and Security: 

The Commission's proposal aims to accommodate a wide range of service providers while enhancing trust and security for users making electronic payments and transactions within the European Union, domestically and internationally.

Enhanced Data Management: 

To ensure transparency and peace of mind concerning data processing, customers will have complete control over which companies can access their information and how it is used. This includes setting up dashboards to manage access rights authorizations, allowing them to be revoked or reinstated at any time, and reinforcing personal data protection in accordance with the General Data Protection Regulation (GDPR).

The directive also aims to improve users' rights by making information on their account statements and ATM (automated teller machine) management fees more transparent. For holders, liability systems will be clearly defined in the event of data breaches, and dispute resolution procedures will be established to prevent liability risks from hindering data sharing.

Boosting Competition and Innovation for User Benefits: 

Through these measures, the European Commission seeks to enhance competition in the financial sector by capitalizing on opportunities created by data-driven innovation. While providing stricter control, these measures should facilitate the entry of new services into the market, offering transparency, security, and alignment with consumer preferences. 

In this evolving landscape, increased transparency, access to enriched consumer data, and the influx of new players promise heightened market competition and catalyzed innovation. However, amidst this surge, striking a delicate balance between encouraging innovation, ensuring competition, and maintaining security remains a central challenge for all stakeholders navigating the complexities of PSD3's impact on market dynamics.

PSD3: Where Do We Stand Today? 


Released at the end of June, PSD3 is intended to address the shortcomings of its predecessor. The vote on this proposal is scheduled for spring 2024, with establishments having 18 months to comply.


So, this is a case to keep a close eye on 👀




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