The European Parliament has formally adopted the revised Directive on Payment Services (PSD2), a set of sweeping new rules proposed by the European Commission to boost competition and innovation while improving consumer protections.
Back in 2013, the European Commission set out proposals for a PSD2 in an effort to improve cross-border payments, tackling what it says is still a fragmented market in areas such as cards, mobile and online.
Updating EU rules on payment services will cut the cost of paying bills, by enabling new market players to use mobile and online tools to make payments on a client’s behalf, said MEPs during Thursday's vote. These rules, informally agreed by MEPs and ministers last May, also aim to make online payments safer, by laying down data protection and liability rules for all online payment service providers, and open the market to competition through the creation of bank APIs.
"The EU payment services market remains fragmented and expensive, costing €130 billion, or over 1% of EU GDP, a year. The EU economy cannot afford these costs, if it wants to be globally competitive”, said lead MEP Antonio Tajani adding that "The new regulatory framework will reduce costs, improve the security of payments and facilitate the emergence of new players and innovative new mobile and internet payment methods".
In a poll of over 100 banks conducted by Finextra earlier this year, 54% of all respondents said that they are in the process of rethinking their retail banking customer relationship and revenue/business model, to accommodate the new rules.
However, only 37% of European banks felt that understanding of the full implications of the new rules was high across all of their IT, payments and retail banking units and at board level.
This is a particular concern around the provisions for mandatory access to bank accounts via APIs, or 'XS2A' in PSD2 terminology. While security is a primary concern for 88% of respondents, the impact of legacy infrastructure is likely to be more pressing, with only five percent of poll participants expressing confidence that their core banking systems will not be a barrier to becoming an 'Open API bank'.
Following the Parliament's vote, the Directive will be formally adopted by the EU Council of Ministers in the near future. Member States will have two years to introduce the necessary changes in their national laws in order to comply with the new rules.