Payment Expert: PSD2 merger sees EC simplify e-payment rules.

European-licensed online gambling businesses have been alerted that the European Banking Authority (EBA) has called for its PSD2 supervision framework to be merged with the EU’s Electronic Money Directive. 

The EBA, which serves as the regulatory agency for financial services of the EU, has recommended the merger of its e-payment supervisory schemes,  in response to stakeholder feedback and the ‘increasing saturation’ of new fintech products servicing European customers’ digital transactions.

Sanctioned in September 2019, PSD2 was authorised as the EU’s revised framework for the supervision and regulating of e-payments and digital payment services providers (PSPs), operating across the European Economic Area (EEA).

The European Commission (EC) had required the EBA to undertake a review of the PSD2 directive in light of new Fintech services encroaching on traditional PSPs services.

Undertaking its review, the EBA responded that whilst some PSD2 objectives were effective, the framework still had significant challenges that were highlighted by 200 proposed amendments.

As such, the EBA recommended its headline action that PSD2 be merged with its counterpart E-Money Directive, with a view to align  regulatory rules and standards on EEA transactions and improving consumer protections.

The EBA’s proposals have focused on enhancing competition, facilitating innovation, protecting consumers’ funds and data, fostering development of user-friendly services and the merger of PSD2 and the Electronic Money Directive were at the forefront. 

Whilst the EBA has recognised some of the positive elements arising from PSD2, it has also addressed a number of issues that its implementation has led to. 

Marca Wosoba – Modulr

It has trained specific focus on the provision of payment initiation services (PIS) and account information services (AIS), as well as new risks which leave customers exposed to social engineering fraud.

Marca Wosoba, Managing Director, Europe at Modulr, stated that calls for the merging of PSD2 and the Electronic Money Directive is ‘welcome news’ to simplify the European payments landscape. 

“The EC’s proposal to enact the EBA’s call to merge PSD2 with the Electronic Money Directive is welcome news. Simplifying the regulatory landscape for payment businesses would create a more competitive and transparent environment that supports innovation and leads to better outcomes for European businesses and consumers.” – Wosoba commented 

“This is a great opportunity for the EC to reduce friction and allow money to flow more easily through the European economy. If coupled with removing restrictions for non-credit institutions to be able to directly participate in settlement schemes, it will drive the significant change needed to create more stability and payment user choice.”

The objective of the EC that called for a review of PSD2 was to gather evidence of the efficacy of the framework and how it had impacted business stakeholders since its arrival in 2018. The EBA was charged with evaluating the framework’s overall benefits against challenges that it may have caused stakeholders. 

Of significance, the PSD2 framework was introduced amid a backdrop of new Fintech firms’ witnessing rapid growth in the payment space – underlining the importance of a simplified and secure framework within which financial firms can thrive as a key European business segment.  

Dean Wallace – ACI Worldwide

Dean Wallace, Director of Consumer Payments Modernisation at ACI Worldwide, emphasised his belief that consolidating the regulatory payments landscape across Europe would be a positive move. 

Nonetheless, he did add that ‘it raises more questions than it answers – namely, will it solve the problem that PSD2 created for banks around customer loyalty and Big Tech’s subsequent encroachment on their turf?’

Wallace continued: “PSD2’s aim was to benefit merchants by making things cheaper, and consumers by creating more choice for digital convenience. In reality, we saw a sharp decrease in bank-led loyalty programmes as well as an increase of consumer choice. 

“While Big Tech hasn’t fully entered the EU payments landscape, consumers are already happy to put the faith they need for payments into the hands of the tech brands they already trust. As such, there is a distinct possibility they could enter the space in a meaningful way, without regulatory scrutiny or cost of compliance, taking the banks’ already dwindling market share.

“While this is a good move from the EC and EBA, the ultimate questions around the future vision of European payments still need to be answered.”


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