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European Commission - Questions and answers
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Payment services: revised rules to improve consumer protection and
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competition in electronic payments
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Brussels, 28 June 2023
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Background
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What is PSD2? Why is it being reviewed?
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The second Payment Services Directive (PSD2), adopted in 2015, sets out the rules for all retail
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payments in the EU, euro and non-euro, domestic and cross-border. The first Payment Services
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Directive (PSD1), adopted in 2007, established a harmonised legal framework for the creation of an
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integrated EU payments market. PSD2 addressed barriers to new types of payment services and
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improved the level of consumer protection and security. It aimed to:
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ensure a level playing field between incumbent and new providers of card, internet and mobile
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payments;
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increase the efficiency, transparency and choice of payment instruments for payment service
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users (consumers and merchants);
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facilitate the provision of card, internet and mobile payment services across borders within the
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EU;
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help innovative payment services to reach a broader market; and
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ensure a high-level protection for payment service users across all Member States.
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The Commission was required to evaluate PSD2, in particular on charges, scope, thresholds and
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access to payment systems. The evaluation took place in 2022, including
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advice
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from the European
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Banking Authority (EBA), a general and targeted
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public consultation
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and a
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report
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from an
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independent consultant. Following the evaluation the Commission decided to propose amendments
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to PSD2, accompanied by an impact assessment.
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What are the main changes being proposed by this revision?
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These amendments represent an evolution not a revolution of the EU payments framework. The
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amendments will improve the functioning of EU payment markets by:
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strengthening measures to combat payment fraud;
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allowing non-bank payment service providers (PSPs) access to all EU payment systems, with
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appropriate safeguards, and giving them a right to have a bank account;
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improving the functioning of open banking, especially as regards the performance of data
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interfaces, removing obstacles to open banking services and consumer control over their data
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access permissions;
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reinforcing the enforcement powers of national competent authorities and facilitating
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implementation of the rules clarifying various elements;
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further improving consumer information and rights;
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improving the availability of cash;
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merging the legal frameworks applicable to electronic money and to payment services.
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Why are electronic retail payments important?
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As highlighted in the Commission's
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Retail Payments Strategy
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of 2020, effective and efficient retail
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payment systems are essential for the smooth running of the economy and for private economic
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operations between individuals. They are equally important for the EU's
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open strategic autonomy.
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The retail payments sector is at the forefront of digital innovation in financial services and multiple
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developments (contactless payments, instant payments etc.) have taken place in recent years.
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Electronic payments in the EU are in constant growth, reaching €240 trillion in value in 2021
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(compared with €184.2 trillion in 2017). The COVID-19 pandemic accelerated this trend. TheStrategy announced the launch of a comprehensive review of the application and impact of PSD2,
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“which should include an overall assessment of whether it is still fit for purpose, taking into account
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market developments
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”.
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What did the evaluation of the PSD2 find?
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The evaluation concluded that PSD2 has had varying degrees of success in meeting its objectives.
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One area of clear positive impact has been that of fraud prevention, via the introduction of Strong
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Customer Authentication (SCA), which has already had a significant impact in reducing fraud. PSD2
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has also been particularly effective in increasing the efficiency, transparency and choice of payment
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instruments for consumers, given the new means of payment that have sprung up since its
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introduction. However, the evaluation finds that there remains an unlevel playing field between
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payment service providers, due partly to the lack of direct access by non-bank Payment Service
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Providers (PSPs) to certain key systems that are necessary to finalise payments. Open banking (i.e.
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the secure sharing of financial data between banks and third-party service providers) was a major
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innovation of PSD2. In spite of the emergence of many new non-bank providers on the market
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offering open banking services, there has been mixed success in its uptake. Obstacles to data access
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by account information service providers (services which collect and consolidate information on the
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different bank accounts of a consumer in a single place) and payment initiation service providers
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(services which establish a payment link between the payer and the online merchant) still remain.
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While cross-border provision of payment services is increasing, many payment systems (especially
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debit card systems) remain largely national.
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Fraud and liability
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What is the Commission's approach on payment fraud?
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The Commission accords utmost importance to the issue of payment fraud. It believes that any
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changes to the PSD2 liability framework should contribute to reducing fraud, without creating moral
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hazard (if the consumers believe that they will always be compensated).
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New types of fraud have emerged for which PSD2 is not equipped. For example, PSD3 will go beyond
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the PSD2 tackling new types of fraud like “spoofing” (impersonation fraud), which blur the distinction
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between unauthorised and authorised transactions, since the consent given by the customer to
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authorise a transaction is subjected to manipulative techniques by the fraudster, who for example
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uses the telephone number of email address of the bank. Prevention mechanisms such as SCA have
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been insufficient to prevent such frauds until now. The IBAN/name check (where a payment is only
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completed after verification by the bank that the name on the account ‘matches' the IBAN linked to
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that name) can help prevent these types of fraud.
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Given the continued existence of social engineering fraud, in which fraudsters manipulate a victim to
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send funds to an illegitimate payee, the Commission is proposing additional anti-fraud measures
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regarding both fraud prevention and redress.
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The new proposed prevention measures include:
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An extension to all credit transfers of IBAN/name matching verification services. These have
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been proposed by the Commission for instant payments in Euro. All consumers should benefit
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from them, for both regular and instant credit transfers;
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A legal basis for PSPs to share fraud-related information between themselves in full respect of
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GDPR (via dedicated IT platforms);
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The strengthening of transaction monitoring;
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An obligation by PSPs to carry out education actions to increase awareness of payments fraud
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