PSD3, the anticipated upgrade to PSD2, emerged in late 2018, marking a regulatory stride five years after PSD2's introduction. The renewed Payment Services Directive aims to encompass a broader scope than its predecessor, reflecting the ever-evolving landscape of electronic payments and the entrance of new providers offering open banking services.
Now, what does PSD3 aim to achieve, and when can we expect its implementation? Let's dive into these unanswered questions.
Before we talk about PSD3, let's understand that PSD stands for Second Payment Services Directive, a set of rules made by the European Union (EU) about how payments work.
PSD2 (Second Payment Services Directive) represents an update of the initial regulation governing payment services in the EU. Although initially published in 2015, it wasn't formally approved until 2018, introducing significant changes to the EU's payment services regulatory framework.
Beyond these, PSD2 encompasses liability and security requirements, consolidation of payment services, and transparency in payment transactions. The implementation of PSD2 posed challenges for financial institutions, technology providers, and regulators in adapting to new technical standards and ensuring a seamless transition.
In essence, PSD3 proposes minimal changes, covering most aspects of PSD2, including transparency, liability, and open banking. However, PSD3 intensifies Strong Customer Authentication (SCA) regulations and imposes stricter rules on accessing payment systems and account information compared to its predecessor.
New rules around data sharing, fraud prevention, authentication, transactions, and accessibility are on the horizon:
Furthermore, PSD3 introduces transformative concepts, such as Open Banking evolving into Open Finance, expanding the types of data customers can share, and enabling a broader range of financial services.
AISPs and PSPs will be obligated to implement their SCA systems, acting as delegated SCA for financial institutions. PSD3 introduces proprietary requirements for card, gateway, and eCommerce schemes.
While an official implementation timeline is pending, expectations point to a final proposal in late 2024, with likely implementation deadlines around 2026. For the detailed proposal, you can refer to the DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL.
While an official implementation timeline for PSD3 awaits confirmation, the expected final proposal in late 2024 and likely implementation deadlines around 2026 set the stage for the financial industry's next chapter.
In conclusion, PSD3 emerges as a continuation of the EU's commitment to fostering innovation, ensuring security, and embracing the ever-evolving landscape of financial services. As financial institutions and stakeholders gear up for the impending changes, the promise of a more secure, transparent, and competitive financial ecosystem beckons on the horizon.