EU Regulator Launches PSD3, Open Finance Consultations

The European Commission has launched a public consultation to gather information for its review of the second EU Payment Services Directive (PSD2). The same day, the EU regulator also published two targeted consultations, one on technical matters related to PSD2 and another on open finance. 

The main consultation asks general questions about the use of payments and whether the PSD2 has met its purposes during the seven years that it has been in place. The targeted consultations address a more knowledgeable audience in these spaces by asking technical questions about the impact of future regulation in payments and open finance. 

The consultations opened on May 10 and the targeted consultations on technical matters and open finance will close July 5, and the main PSD2 consultation is set to close Aug. 2. Comments may be submitted through the commission’s site and this is an early stage of any possible legislative review of the PSD2. The consultations do not constitute the final position or any formal proposal from the European Commission, but they are usually a good indication of the most important areas for the regulator. If after the evaluation of the PSD2, the commission concludes that a revision is needed, it has several options at its disposal. From non-legislative measures, relying on voluntary measures, to limited or extensive amendments to the PSD2, and according to statements from some EU Commissioners, new rules and amendments are likely.  

The PSD2 has made payments in Europe easier since its inception in 2015, but it is also facing certain challenges, the commission explained in the report. The regulator highlighted four areas of particular interest that may be addressed in the new PSD3. 

• New Market Players: FinTech and Big Tech firms are offering services that didn´t exist or were just emerging when the PSD2 was adopted. Payment solutions using new technologies, like digital or pass-through wallets, contactless payments or buy-now, pay-later (BNPL) solutions may be part of the revision. Crypto assets were not specifically mentioned but were not excluded either. The commission will evaluate whether the scope, exclusions and definitions of the directive are still appropriate to ensure relevant market players are regulated, a level playing field exists and risks are sufficiently mitigated. 
• Payment Fraud: While the PSD2 improved payment security by requiring payment service providers to apply strong customer authentication, new forms of payment fraud have emerged, like authorized push payments. The commission will assess whether amending the legislative framework is necessary to ensure new payment solutions are sufficiently secure, or if new transparency requirements and stronger customer authentication measures are needed. 
• Access to payment account data: PSD2 was the beginning of open banking, but according to the regulator there are various challenges related to accessing payment accounts and the regulator will assess these challenges. The review will also consider access to payment infrastructures and systems. It will also examine sanctioning powers as part of enforcing the PSD2. 
• International Payments: the review will assess international payment rules between the EU and other countries. This may include the extension of execution timing requirements to transactions where only one of the PSPs is involved in the European Economic Area. 

For the open finance consultation, some of the questions focus on the use of existing open finance services, like the use of payment initiation services to access payment accounts or the types of financial services data that respondents would like to be able to access via third-party providers, like mortgages, savings, pension services and insurance.  

According to the commission, open finance refers to third-party service providers’ access to (business and consumer) customer data held by financial sector intermediaries and other data holders for the purposes of providing a wide range of financial and information services. Currently, third-party service providers only have access by law to certain customer data, but this consultation seeks feedback about whether to extend access rights to more customer data. 

Read More: EU Banking Authority Payment Fraud Consult May Impact PSD2