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PSD2: why reform was needed but weaknesses remain

The Payment Services Directive (PSD), adopted in 2007, laid the legal foundation for the creation of an EU-wide single market for payments, as well as providing the necessary legal platform for the Single Euro Payments Area (Sepa). A revised version - PSD2 - is expected to be approved by the European Parliament in September 2015, to be published between October and December 2015 in the Official Journal of the European Union. So why was reform of the payment services directive so badly needed?

In an article published yesterday, Ignacio González-Páramo of Payvision, writes that reform was indeed required. He welcomes steps forward such as the introduction of new services and categories of Payment Services Providers (PSPs), such as Third Party Providers (TPPs), which can gain access to a payer’s current account at that payer’s request, as well as the extension of the directive to include payments where one of the parties is not based in the European Economic Area (EEA) and those made in non-EEA currencies.

González-Páramo also notes several weakness in the revised directive, however, including a potential increase of the cost of operating cross-border for payment institutions who have to appoint a central contact point in the host country to interact with the host authorities in local language and format. He also questions whether the European Banking Authority (EBA) has the resources necessary to carry out the supervisory tasks with which it has been entrusted by the PSD2.

Piet Mallekoote, of the Dutch Payments Association, also raises concerns over security involved in giving bank account access codes to TPPs – such as phishing attacks. Mallekoote writes that, while the European Commission has tightened the requirements for TPPs and has asked the EBA to draw up Regulatory Technical Standards (RTS) for security procedures and measures, these have to be implemented by the payment service providers no later than 2018. He adds: “This has not eliminated our concerns, however.” He also notes that some of the unintended consequences of PSD2 could be increased transaction costs in the payment chain.

While the payments industry awaits the imminent approval of the directive by the European Parliament, it remains to be seen whether the revised regulations, which EU member states will have to enact in their national legislation by late 2017, will provide the legal framework needed for Europe's fast-developing and growing payments environment.

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Payments - Receipts
SEPA Payment Structure & Services