Two new draft proposals from the European Commission aim to further improve consumer safety in electronic payments and strengthen the regulations around financial data sharing in Europe. The proposals include Payment Services Directive 3 (PSD3) and a separate proposal on Payment Services Regulations (PSR), which together would replace PSD2, the current legislation that governs and regulates Open Banking activity across the EU. (Refresh your understanding of Open Banking with our article here)
The proposals follow a long consultative process to review and revise PSD2, which was first introduced in 2018 with the goal of establishing an integrated, competitive and innovative EU payments market, with a high level of customer protection. The legislation included rules to improve consumer safety, make online payments easier, and protect against fraud, among many other objectives.
But over the last year, officials sought comment from experts in the field of open banking as well as the public about how PSD2 could be improved, with the possibility of replacing it with a new proposal.
During consultations, officials determined that PSD2 had a number of successes including reducing fraud and strengthening consumer protection (read about how customer data is protected here). But it also fell short in a few ways, including an imbalance between bank and non-bank PSPs and issues with data access interfaces for Open Banking service providers, among others.
The consultation process also led them to determine four main objectives in the new legislation:
Here are some of takeaways from both the PSD3 proposal, which mainly focuses on licensing for payment firms, and the separate PSR proposal, which is focused on establishing clearer regulations around open banking:
APIs are essential to the process of Open Banking because they pave the way for data sharing in a safe, secure, standardized and efficient w
Open banking is extremely popular around Europe, not just the UK
Open Banking is not only trustworthy, but safety is a major priority