Friday, 8 January 2016

A bit more about PSD2

The new PSD2 main aspects are the following:

1) Use third-party providers to cut payment costs
  • A payer using an online account will have the right to use payment software, devices and applications provided by an authorized third party and to have payments executed on his or her behalf by this provider.
  • For example, payers who have no credit or debit card will be able to authorize new market entrants to use their bank details to make payments from their accounts.
  • Payment service providers’ charges should not exceed their direct costs. Additional charges for using payment instruments, such as credit and debit cards, for which banks’ “interchange” processing fees are already regulated, will be prohibited.

2) Making payments safe:
  • A bank servicing a payer’s account could deny a third party service provider access to it only for objectively justified and substantiated security reasons which have been reported to the supervisory authorities. This safeguard should preclude any possibility of banks “blocking” the market for new payment services.
  • Third-party payment service suppliers, for their part, would be required to ensure safe authentication of the user and reduce the risk of fraud. They would have to ensure that a user's personal payment data transit through the safe channels and that they are shared only with the user’s consent.
  • In the event of an unauthorized payment being made from his or her account, the holder should not lose more than €50 if the payment instrument was lost, stolen or misused. A service provider that fails to act to prevent such a fraud after a notification of a loss, or does not require strong customer authentication when necessary, could be deemed liable for its client’s losses and ordered to remedy the financial damage.

Next steps:
The law now needs to be officially endorsed by EU member states before it can enter into force.

The payment services directive (PSD2) is the most recent set of EU rules on payments, which also covers online payment services.

Two previous pieces of legislation are:
  • 2012 Single euro payments area (SEPA) - requiring banks to comply with SEPA rules enables their clients to use a single bank account to make euro payments to and from all SEPA countries, the 28 EU
  • Member States plus Iceland, Liechtenstein, Norway, Switzerland and Monaco. This makes payments faster and cheaper with no differentiation between national and cross-border euro payments
  • 2014 interchange fees are capped and surcharging prohibited for consumer cards under the Multilateral Interchange Fees (MIF) regulation for card-based payment transactions

Written by:
Jose-Carlos Cuevas
Regional Treasurer Europe
GE Power & Water

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