PSD2 - Regulatory agenda updates
The entry into application of the Revised Payment Services Directive (PSD2) is now around the corner, about to unleash a revolution in the way payments are delivered across Europe and transform how financial institutions interact with each other. Are you ready for the challenge?
PSD2 was published in December 2015, triggering in the ensuing 2 years various assessments and consultations to translate the Directive into national laws as well as to establish the Regulatory Technical Standards (RTS) on key dimensions enumerated by the text. PSD2 will be key in changing the payment landscape and the consumer’s experience. To this end, PSD2 essentially:
- widens the regulated payment landscape welcoming new actors (Payment Initiation and Account Information Service Providers, PISP and AISP respectively) and types of payments (transactions with at least one end within the EU, namely “one leg-out”) are in scope, to push competition and innovation
- asks for stronger customer authentication, in an effort to lower fraud especially within an enlarged payment landscape
- requires financial institutions to provide PISPs and AISPs with access to account information, impacting on the different stakeholders’ technical infrastructure
- modifies the conditions of insurance & liability within payment transactions, lowering liabilities and requiring stakeholders to have professional insurance
What is expected from e-money institutions (EMIs)? The survivor’s perspective
In line with the above, EMIs will be expected to at least comply with the Directive’s text. EMIs are further impacted by PSD2 as it modifies the main directive currently regulating them, i.e. the Revised E-Money Directive, EMD2. Within this perspective, EMIs are expected to respect the “substance requirement” in the following way:
- have their head office in the same Member State where their registered office is. In this Member State, EMIs are expected to carry out a significant part of their payment services
- where relevant, issued e-money should be accepted and used by a relevant amount of local customers and merchants
Can e-money institutions enhance their business leveraging on PSD2? The challenger’s perspective
EMIs will have a head start compared to other Fintech competitors given that they already have a license that is required by PSD2. Benefitting from this head start, coupled with the technological infrastructure and eminence as well as specialized offering already in place, EMIs could explore the possibility to provide the up and coming AIS and PIS services gaining a wider share of the consumer market.
EMIs could also create partnerships with other payments actors to ensure a deeper penetration of the market as well as an increased and sophisticated range of services.
While the PSD2 entry into force is defined by January 13th 2018, the effective application of the RTS on Strong Customer Authentication and Secure Communication remains uncertain.