Changes to the Payment Services Regulation

The European Parliament made a big move on April 25, 2024, in the area of internal market payment and electronic money services. A news release announcing the adoption of a first reading position on the draft Directive detailed their conclusion. The purpose of this directive was to abolish Directive 2009/110/EC and alter Directive 98/26/EC.

The proposed Regulation on payment services in the internal market, which aims to alter Regulation (EU) No 1093/2010, was also emphasized in the news release. The press statement underscored the independence of MEPs in the Economic and Monetary Affairs Committee, which was granted the option to initiate talks using the agreed-upon negotiating mandate from the April plenary or devise a new one. Choosing the former would hasten the negotiation process and enable talks to get underway as soon as possible.

Source

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Texts adopted by plenary on economic and financial matters, first reading closed | News | European Parliament

During this plenary session (22-25 April 2024), numerous files on economic or financial services topics were closed in first reading by the plenary.

European Parliament

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UK Payment Services Regulation

The HM Treasury unveiled the 2023 regulations amending electronic money, payment cards, and payment services. Implemented from Sep 2023 to Jan 2024, these changes focus on sustainable growth, environmental targets, and payment system efficiency.

GrandAlessandro Micagni

Payment Service Regulations for EU: Emphasis on Customer Protection

Aiming to promote an open and competitive payment service landscape across the EU, the European Parliament recently voted on proposed revisions to the Payment Services Regulation and the directive. Adopted with resounding support, the ideas emphasize a determination to improve consumer protection against fraud and data breaches while working toward increased uniformity among electronic money and payment services within the European Union. All payment service providers, including banks, post office giro institutions, and payment institutions, would be covered by these restrictions.

Improving Security Measures for Transfers and Data

To strengthen the security of transactions and protect the confidentiality of personal information, MEPs have specified strict guidelines that Payment Service Providers (PSPs) must follow. A major step in the right direction towards increasing consumer trust and confidence in financial transactions, this regulation places a high emphasis on the verification of unique identities, effective client authentication, and the safeguarding of user data:

• Verification of Unique Identifiers: It is required that Payment Service Providers (PSPs) provide free verification of unique identifiers, including IBANs. By ensuring the authenticity and correctness of transactions, this verification procedure seeks to lower the possibility of fraudulent activity.

• Strong Customer Authentication: PSPs must put strong authentication procedures in place to confirm the legitimacy of clients who are starting transactions. PSPs can reduce the danger of unwanted access and improve the security of payment procedures by implementing multi-factor authentication techniques.

• Payment for Fraudulent Losses: PSPs who do not implement sufficient fraud protection measures will be responsible for making up any losses that clients suffer as a result of fraudulent activity, according to MEPs. This clause stresses how important it is to put consumer protection first and acts as a disincentive against carelessness.

• Protection of Personal Data: When it comes to PSPs processing personal data, customers' consent is crucial. Customers must expressly consent to the processing of their personal data, according to the GDPR. To further provide customers more control over their privacy rights, people should be able to withdraw access to their data and opt out of data sharing practices at any moment.

By putting these safeguards in place, MEPs hope to defend people's fundamental rights to privacy and data protection while also improving the security and integrity of financial transactions.

Transparent Fees: Clarity in Payment Transactions

Transparency in charge schedules is essential to building customers' confidence and trust throughout payment transactions. In order for customers to make educated decisions, they should have easy access to complete and accurate information about all costs related to their transactions. Here, we examine the essential costs listed to guarantee openness and understanding in financial transactions:

• Currency Conversion Fees: Customers should be made aware of any associated fees before beginning a financial transaction that involves currency conversion. Customers may comprehend the entire cost of the transaction and make wise judgments about their financial activity when currency conversion fees are transparent.

• Fixed Fees for Cash Withdrawals: Any fixed fees related to cash withdrawals should be made plain to customers in an understandable manner. Customers should be able to evaluate the cost-effectiveness of their withdrawal transactions by being informed about any fixed charges they may face when withdrawing money from ATMs or other financial institutions.

Customers can make payments with confidence knowing they have access to clear and thorough information about all related costs thanks to the emphasis on fee disclosure transparency. In the end, this dedication to openness empowers clients to make wise financial decisions by fostering justice and accountability in the financial services industry.

Boosting Cash Availability and Enabling New Payment Services in the EU

MEPs have suggested improvements to accessibility in response to the demand for better cash availability, especially in isolated or rural locations. These steps include loosening regulations for ATMs that just offer cash withdrawal services, granting exceptions for retail stores that offer stand-alone cash services, and permitting withdrawals of up to €100 without the need for a transaction.

Concurrently, there are initiatives to launch new categories of payment services, especially in the area of online payments. The proposed laws aim to open up the EU payment services market to new entrants and facilitate innovations like online payment systems that go beyond credit cards. Although some member states have previously made certain services, such Sofort, IDeal, or Trustly, available, they have not yet been subject to EU law. The proposed regulations seek to provide uniform standards throughout the EU by addressing issues with liability, security, and data protection. Moreover, the laws are crafted to maintain technological neutrality, allowing for future developments in payment systems while maintaining consistent regulatory requirements.

New Benchmark Rules to Safeguard Financial Stability

The European Parliament's Economic and Monetary Affairs committee has approved new rules that will improve financial stability and lighten the administrative load on smaller benchmark providers. In order to prevent greenwashing and guarantee proper oversight, these regulations primarily target key benchmarks, major benchmarks, EU Climate Transition Benchmarks (EU CTB), EU Paris-aligned Benchmarks (EU PAB), and specific commodities benchmarks. MEPs suggest a voluntary supervisory scheme for other benchmarks and support maintaining the current threshold for establishing significant benchmarks. They also recommend getting internationally accepted identity codes for benchmarks and urge ESMA to create technical criteria for benchmark classification.

For crucial, major, cross-border, third-country, EU CTB, and EU PAB benchmarks, ESMA is expected to take on a supervisory role. In order to promote continuity and investor protection, the committee also permits previously overseen benchmark administrators to maintain their position for nine months following the adoption of the new regulations without having to reapply. Lead MEP Jonás FERNÁNDEZ highlights that the proposed amendments ensure continued access to benchmark indices with strong investor safeguards by improving transparency, streamlining third-country benchmark legislation, and strengthening ESMA's monitoring.

MEPs Adopt New Rules for Orderly Bank Market Exit to Protect Taxpayers

Significant adjustments intended to guarantee an orderly market exit for banks of all sizes have recently been agreed by the Economic and Monetary Affairs committee. These changes aim to reduce moral hazard in the banking industry and lessen the financial burden on society. In order to improve financial stability and protect taxpayer funds, important issues such depositor hierarchy, bank resolution in the public interest, and deposit protection are addressed in the adopted measures.

• Bank Resolution in the Public Interest: MEPs support applying the resolution framework to any bank, regardless of size, that is judged to be in the public interest. Prioritizing goals such depositor protection, financial system stability, and continuation of essential operations is necessary for the resolution process.

• Depositor Hierarchy: In order to increase the accessibility of deposit guarantee schemes (DGS) and the single resolution fund (SRF) for resolution funding, MEPs modify the hierarchy of creditors. They suggest a two-tiered strategy that gives deposits from small and retail firms priority over those from governments and major corporations.

• Safeguarding Deposits: MEPs place a strong emphasis on the coordination of the roles played by deposit guarantee schemes, as well as the necessity of operational openness and cost-effectiveness. They suggest guaranteeing prompt repayment by DGSs and expanding deposit coverage to specific events like real estate sales.

• Reducing Moral Hazard: Banks that receive DGS financing are required to make contributions to restructuring initiatives from their own funds in order to mitigate moral hazard issues. In addition to DGSs, shareholders, creditors, or related business groups should be held accountable and reimbursed appropriately for preventive actions taken.

The implementation of these new regulations will help to improve financial stability, safeguard taxpayer funds, and promote transparency in the banking industry.

Payment Services Directive advanced by the European Parliament as a step toward improved financial regulations

A major step forward in the quest for improved financial laws inside the Internal Market has been taken with the approval by the European Parliament of a first reading stance on the proposed Directive and Regulation for payment services. MEPs have opened the door for more streamlined and effective payment systems by perhaps repealing outmoded directives and introducing new laws. The Economic and Monetary Affairs Committee's latitude guarantees a careful evaluation of negotiating mandates, providing a window of opportunity for accelerated discussions and prompt regulatory reform implementation. This action demonstrates the Parliament's dedication to promoting a safe, secure, and competitive financial environment while addressing the changing demands of businesses and consumers in the digital era.