As i gathered the top payments news stories in February 2017, i came across a speech the EBA (European Banking Authority) Chair – Andrea Enria – gave at the Westminster Forum on PSD2 in the UK. It was an interesting speech which clearly outlines the importance of PSD2 (Payments Services Directive) for the whole of Europe, and more interestingly for us Brits pinpointed the continued importance of PSD2 in the UK. For a more thorough background on PSD2, refer to the post 5 Things You Need to Know About PSD2.
1. PSD2 in the UK Matters:
Andrea described PSD2 as a major game changer for the whole of Europe. and went on to describe the importance of PSD2 in the UK, even though the UK government is on the brink of triggering Article 50 of the Lisbon Treaty which will initiate its exit from the European Union (EU):
The UK is Legally Bound by PSD2
- The UK, its national authorities and financial institutions, continue to be legally bound by PSD2 once it goes live (13th January, 2018) until the UK exits the EU
UK and EU Shared Objectives
- The objectives of PSD2 – increase competition and innovation in payments and financial services – are also the primary objectives of the various UK financial services and payments authorities
The UK is a Key Contributor to PSD2
- The EBA is developing 11 PSD2 Technical Standards and Guidelines with the member 28 EU national regulatory authorities – which includes the UK’s Financial Conduct Authority – who has been a key and significant contributor so far
UK Businesses NEED PSD2
- Andrea explained that the UK has over a third of the EU’s payment and electronic money institutions, and when the UK withdraws from the EU these businesses will want to continue to do business with the EU
2. PSD2 will increase Competition and Innovation in the Payments Industry
So, now Andrea Enria gave some history and described the objectives of PSD2.
Quick PSD2 Objectives:
- The revised Payments Services Directive (PSD2) emerged on 13th January 2016, from the first Payments Services Directive (PSD1) in 2007, and will go live on 13th January, 2018
- The European Commission, European Parliament and European Council wanted to open up the payments landscape by allowing non-bank competitors to access payment accounts of banking customers and provide the following 2 services:
- Payment Initiation Services
- Account Information Services
- Other objectives include: Promoting competition in payments, increasing payment transaction security, improving the customer experience, promoting integration of European payment markets, better customer protection enabling payment and security innovation
3. PSD2 Standards and Guidelines are Complex & Changes Have been Made:
To make PSD2 happen, the EBA developed 11 mandates:
- 6 Technical Standards – once adopted by the EU Commission become EU law across all EU nations
- 5 Guidelines – which will become legally binding once the appropriate national authority implements them
Andrea talked about the conflicting objectives of PSD2 and the difficult trade-offs the EBA had to make as it developed these mandates, particularly when it came to the Technical Standards on Strong Customer Authentication (SCA) and Common and Secure Communication (CSC). After a consultation paper on Strong Customer Authentication (SCA) and Common and Secure Communication (CSC) strong views were aired and significant feedback was received by key stakeholders. It led the EBA to make some changes:
- Removing references to specific technologies, thereby allowing technology-neutrality
- Around strong customer authentication, 2 exemptions will be introduced based on:
- Transaction risk analysis
- Unattended terminals for transport or parking fees
- Increasing the threshold for remote payment transactions from EUR10 to EUR30
- Account Servicing Payment Service Providers (ASPSPs) must offer at least one interface for Account Information Service Providers (AISPs) and Payment Initiation Service Providers PISPs to access payment account information
- For further and full details about the above changes please refer to the EBA Final Draft Regulatory Technical Standards (RTS) on Strong Customer Authentication (SCA) and Common and Secure Communication under PSD2
Interesting stuff, eh?