PSD3: Payment Services Directive Proposal

On June 28, 2023, the EU Commission introduced proposals for a Payment Services Directive 3 (PSD3) and a Payment Services Regulation (PSR), marking a significant stride in reshaping the regulatory framework for payment services. Aimed at enhancing transparency, the new proposals will extend the term "payment institutions" to include establishments conducting e-money business. PSD3 will regulate the granting of authorisation and supervisory requirements for these institutions while PSR will oversee the information obligations for all categories of payment service providers. The proposed directives and regulations are expected to streamline the payment service landscape and foster a more secure, efficient, and inclusive financial environment. They will also pave the way for innovations in Open Banking and digital wallets, enhancing the financial experience for consumers and businesses alike. As these proposals move through the legislative process, they promise to bring a new era of financial regulation that champions transparency, innovation, and consumer protection.

Payment Services Directive 3 (PSD3) and Payment Services Regulation (PSR): A Major Leap Towards Transparent and Innovative Payment Services

On June 28, 2023, the European Union (EU) Commission unveiled groundbreaking proposals for the Payment Services Directive 3 (PSD3) and the Payment Services Regulation (PSR). These proposed regulations are set to reshape the payment services industry, enhance transparency, and foster innovation. By extending the scope of payment institutions to include e-money businesses, the PSD3 and PSR aim to create a more secure, efficient, and inclusive financial landscape. In this article, we delve into the implications of these proposals, their impact on financial institutions, and suggested mitigating efforts to ensure compliance.

Expanding the Landscape for Payment Institutions

The PSD3 and PSR introduce a significant expansion by including establishments conducting e-money business under the term "payment institutions." This expansion holds immense potential for the e-money sector, igniting growth and fostering innovation. However, it also entails heightened regulatory standards that payment institutions must adhere to, ensuring robust and transparent operations.

Enhanced Transparency and Accountability

Transparency and accountability lie at the core of the proposed regulations. By enforcing pre-contractual information obligations and liability rules, the PSD3 and PSR aim to protect consumers and build trust in payment service providers. These measures ensure that customers have access to clear and comprehensive information, empowering them to make informed decisions while reducing the risks associated with payment services.

Revolutionizing Open Banking and Digital Wallets

One of the most exciting aspects of the PSD3 and PSR proposals is their potential to revolutionize Open Banking and digital wallets. Through revised definitions and exemptions, the regulations encourage the development of innovative and user-friendly financial services. The revised definition of "payment accounts" and the exemption of digital wallets from the authorization requirement open up new possibilities for seamless and secure transactions, enhancing the overall financial experience for individuals and businesses alike.

Navigating Regulatory Standards

While the proposed regulations promise numerous benefits, they also present challenges for financial institutions. Compliance with the new regulatory standards becomes crucial to ensure continued operations and avoid penalties. Financial institutions, particularly payment institutions and e-money businesses, must closely monitor the progress of the PSD3 and PSR throughout the legislative process. By assessing the impact of the proposed regulations on their operations, they can proactively adapt processes, systems, and policies to align with the forthcoming requirements.

Mitigating Efforts for Compliance

To stay compliant with the PSD3 and PSR, financial institutions should focus on enhancing transparency, information disclosure practices, and collaboration. Monitoring regulatory developments, seeking guidance from regulatory bodies, and participating in industry associations can provide valuable insights and best practices. By prioritizing these mitigating efforts, financial institutions can navigate the changing regulatory landscape effectively.

The EU Commission's proposals for the PSD3 and PSR represent a significant leap towards transparency, innovation, and consumer protection in the payment services industry. As financial institutions adapt to the evolving regulatory landscape, they must embrace the expansion of payment institutions, focus on transparency, and leverage opportunities presented by Open Banking and digital wallets. By staying informed, proactively adjusting their operations, and collaborating within the industry, financial institutions can ensure compliance and successfully navigate the transformative changes brought about by the PSD3 and PSR.

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The EU Commission’s proposal for PSD3 and PSR - Overview

Overview of the main content of PSD3 and PSR as well as major innovations compared to PSD2 and the E-Money Directive.

PAYMENT.TECHNOLOGY.LAW.Jana Terpetschnig

https://paytechlaw.com/en/the-eu-commissions-proposal-for-psd3-psr-overview/