The Payment Services Directive (PSD) is a regulatory initiative from the European Commission (Directorate General Internal Market)
which will regulate payment services and payment service providers (as defined in the Directive) throughout the European Union
(EU) and European Economic Area
The purpose is to increase pan-European competition and participation in the payments industry (also from non banks), as well as to provide for a level playing field by harmonising consumer protection and the rights/obligations for payment providers and users.
The final adopted text of the Directive (2007/64/EC) was officially published on 5 December 2007, to be transposed into national legislation by all EU (and EEA) Member States by 1 November 2009 at the latest. Although the PSD is a maximum harmonisation Directive, certain elements still allow for different options/choices by individual countries.
Whereas SEPA (Single European Payments Area)
is a self-regulatory initiative by the banking sector of Europe (represented in the European Payments Council
– EPC ) which defines the harmonisation of payment products, infrastructures and technical standards (Rulebooks for Credit Transfer
, ISO 20022
XML message format, EMV
chip cards/terminals), the PSD is driven by regulators and provides for the necessary legal framework within which all payment service providers will operate.
The PSD contains two main sections: the prudential regime for payment service providers and the business conduct rules.
The prudential regime defined in the PSD describes which type of organisations can provide payment services. Next to credit institutions (i.e. banks) and certain authorities (e.g. Central Banks, government bodies), the PSD mentions Electronic Money Institutions (EMI), created by the E-Money Directive (EMD) in 2000, and also creates the new category of Payment Institutions. Organisations that are not credit institutions or EMI, can apply for an authorisation as PI (certain capital and risk management requirements apply) in any EU country of their choice (where they are established) and then passport their payment services into other Member States across the EU without additional PI authorisation requirements.
The business conduct rules specify the requirements around transparency of information to be provided by payment service providers to payment users, including any charges, exchange rates, transaction references and maximum execution time. It also stipulates the rights and obligations for both payment service providers and users, including how to authorise and execute transactions, liability in case of unauthorised use of payment instruments, refunds on payments, revoking payment orders, maximum execution time and value dating of payments.
Each country must designate a Competent Authority to provide prudential supervision of the PIs and to monitor compliance with the business conduct rules, as transposed into national legislation.
- March 2000: Through the Lisbon Agenda Europe’s leaders decide to make Europe “the world’s most competitive and dynamic knowledge-driven economy” by 2010
- Dec 2001: Regulation EC 2560/2001 on cross-border payments in euro
- 2002: Creation of the European Payments Council (EPC) by the banking industry, driving the Single Euro Payments Area initiative to harmonise the main non-cash payment instruments across the Euro area (by end 2010)
- 2001-2004: Consultation period and preparation of a Directive to create a New Legal Framework for payment services in the EU
- Dec 2005: Proposal for Directive by DG Internal Market Commissioner McCreevy
- 5 Dec 2007: Official publication of the adopted Payment Services Directive
- 1 Nov 2009: deadline for implementation of PSD in national legislation
- New types of payment providers, new payment innovations/solutions are likely to emerge in Europe, creating a new competitive dynamic
- Removal of barriers to access by payment service providers to any EU country (cross-border service offering becomes much easier)
- Increased regulatory compliance requirements might force small/medium sized players to reconsider their role in the value chain