PSD3 – key developments

Further to the launch of the European Commission's (Commission) Digital Finance Strategy and Retail Payments Strategy in September 2020, the Commission recently opened three consultations to progress these strategies and in particular to progress its review of the revised Payment Services Directive (PSD2) and its work on open finance:

Below we provide an overview of, and set out key questions emerging from, the Commission's targeted consultation on the review of PSD2 (Consultation). The Consultation will assist the Commission in determining whether PSD2 remains fit for purpose, and is targeted at professional stakeholders, including individuals and organisations that have more in-depth technical knowledge and/or working experience in the field of payments.

Consultation - background

The Consultation is part of the Commission's overall strategy for the review of PSD2, which aims to take stock of PSD2's impact on the continually evolving payments market, and assess whether it remains fit for purpose.

In particular, having regard to the continued digitalisation of society and the emergence of new market players, payment solutions, services and technologies in the payments market, the review aims to examine whether start-ups and incumbents are treated equally. This review is based on the principle of "same business, same risks, same rules".

The review also aims to assess the effectiveness, efficiency, costs and benefits, coherence, and EU-added value of PSD2, and determine if changes are needed (and if so, the type and scope of changes).

Consultation - objective

The Consultation will inform the Commission on the application and impact of PSD2 taking into consideration, among others, developments in the payment market, payment user needs and the need for possible amendments.

The responses to the Consultation will provide guidance to the Commission in preparing a report on the application and impact of PSD2, and will serve as input for an impact assessment accompanying a possible legislative proposal for PSD3, if considered appropriate.

Consultation - key questions

  • Did PSD2 achieve its objective of creating a more integrated and efficient European payments market, and opening up this market to more competition?
  • Has PSD2 facilitated innovation in the payments market, whilst ensuring a high level of security and consumer protection?
  • Has PSD2 facilitated innovation in a technology and business model-neutral way that allows for the development of new types of payment services?
  • Have the benefits stemming from the application of PSD2 outweighed the costs of its implementation?
  • Did PSD2 enable competent authorities to better monitor and supervise the activities of the (new) payment service providers?
  • Did PSD2 enable enhanced cooperation and information exchange between authorities in the context of authorisation and supervision of payment institutions?
  • Have PSD2's requirements contributed to sound and effective regulation of the provision of payment services, and are they still fit for purpose?

Next steps

The Consultation is an important step in the Commission's broader review of PSD2, and will inform a possible legislative proposal for revising PSD2, if considered appropriate. As previously highlighted, the PSD2 review is also a key strategic priority of the Central Bank of Ireland this year. Financial service providers, and in particular payment institutions and persons in the unregulated payments space, should proactively engage with the Consultation and have their say in the future regulation of payment services, both in Ireland and the EU.

For further information in relation to this topic, please contact Kevin Allen, Partner, Patrick Brandt, Partner, Christopher Martin, Of Counsel, Sian Langley, Knowledge Lawyer or any member of ALG's financial regulation team.

Date published: 21 June 2022