European Commission proposes new measures to modernise payments
The European Commission has put forward new proposals today in a bid to modernise payment services across the continent, including upgrading the Payment Services Directive (PSD2) to PSD3 and enhancing the rules around financial data access.
The EC proposes modernisation of payments and upgrade to PSD3
The EC says the proposals reflect the changes seen in the payment services market in recent years. It claims electronic payments in the EU have been on the rise and were greatly accelerated by the Covid-19 pandemic.
With new providers entering the market, including the rise of open banking services, the EC says sophisticated kinds of fraud have also emerged.
“In response to these developments, today’s package seeks to ensure the EU’s financial sector is fit for purpose and capable of adapting to the ongoing digital transformation, and the risks and opportunities it presents – in particular for consumers,” the EC says in a statement.
As part of its push to “bring payments and the wider financial sector into the digital age”, the proposed measures include a revision of the Payment Services Directive and a legislative proposal for a framework for financial data access.
“Today’s new rules will further improve consumer protection and competition in electronic payments, and will empower consumers to share their data in a secure way so that they can get a wider range of better and cheaper financial products and services,” the EC says.
From PSD2 to PSD3
The Commission plans to amend and modernise the current PSD2 which will become PSD3 and establish, in addition, a Payment Services Regulation (PSR). The proposal aims to:
- Combat and mitigate payment fraud by enabling payment service providers (PSPs) to share fraud-related information within themselves, increase consumer awareness and strengthen customer authentication.
- Improve consumer rights and provide them with “more transparent” information.
- Allow non-bank payment service providers access to all EU payment systems with appropriate safeguards.
- Remove remaining obstacles to providing open banking services and improve customers’ control over their payment data.
- Improve the availability of cash in shops and via ATMs.
Framework for Financial Data Access (FIDA)
The second proposal aims to establish “clear rights and obligations” to manage customer data sharing in the financial sector beyond payment accounts. Measures include:
- The possibility but no obligation for customers to share their data with data users such as financial institutions and fintech firms.
- Obligation for data holders (such as financial institutions) to furnish the data available to other data users by putting in place the required technical infrastructure and subject to customer permissions.
- Full control for customers over who can access their data and for what purpose.
- Standardisation of customer data and required technical interfaces.
- Clear liability regimes for data breaches with dispute resolution mechanisms.
- Additional incentives for data holders to put in place high-quality interfaces for data users.
The EC says such a proposal will lead to innovation in financial products and services for customers and will stimulate competition in the financial sector.
“For financial services, both the EU’s proposed FIDA framework and the proposals on PSD/PSR could enable access to new, broader data sets to enhance the way banks operate, encourage innovation across sectors, and support a more effective and efficient payments system,” comments James Kemp, managing director at the Association for Financial Markets in Europe (AFME).
Supporting cash and the digital euro
In addition to these measures, the EC has also put forward two other proposals to protect access to cash for EU citizens and to establish a legal framework for a possible digital euro.
The Commission says the new proposals have been made “to ensure that citizens and businesses can continue to access and pay with euro banknotes and coins across the euro area, and to set out a framework for a possible new digital form of the euro that the European Central Bank (ECB) may issue in the future, as a complement to cash”.
The EU has been working for some time on its central bank digital currency (CBDC) project in response to the increasing digitalisation of the economy.
“The digital euro would give consumers an alternative European-wide payment solution, in addition to the options that exist today. This means more choice for consumers and a stronger international role for the euro,” the EC says.
The Commission concludes: “While today’s proposal – once adopted by the European Parliament and Council – would establish the legal framework for the digital euro, it will ultimately be for the European Central Bank to decide if and when to issue the digital euro.”
