The Payment Services Directive II (Directive 2015/2366/ EU of 25 November 2015 on payment services in the internal market) (PSD 2) must be transposed into local legislation by 13 January 2018. PSD 2 enables bank customers, both consumers and businesses, to use thirdparty providers (Payment Initiation Service Providers (PISPs) and Account Information Service Providers (AISPs)) to manage their finances. The scope of regulation will also include the issuing of card-based payment instruments connected to an account provided by another payment service provider (Third Party Payment Instrument Issuers). Once their customers have provided consent, banks are obliged to provide these third-party providers with access to such customers’ accounts through machine-to-machine communication. Banks can, however, also act as PISPs and AISPs themselves.
As well as creating a framework to allow new competitors to enter the market, PSD 2 also creates a single set of rules for payments and payment services across the European Union. PSD 2 also requires the payment service providers to exercise robust customer authentication when a customer initiates an electronic payment transaction and accesses its payment account online.
PSD 2 is relevant to payment service providers, such as credit institutions, payment institutions, e-money firms and their agents, many FinTech firms, social media networks and telecommunications firms among others.
PSD 2 is a maximum harmonization directive, so the member states may not introduce provisions other than those laid down in the directive. However, PSD 2 provides for a number of options, meaning that each individual member state can decide whether or not to exercise such optionality.
PSD 2 will have a major impact on payment and account services delivered in Europe. Together, the Nordic countries (Denmark, Finland, Norway and Sweden) represent a significant and strategic market in Europe. This article describes the implementation of PSD 2 in the Nordic countries, highlights the applied member state options and points out where the local implementation goes further than the minimum obligations in the directive.
On 2 June 2017, the Danish parliament passed legislation which implements PSD 2. The legislation comes into force on 1 January 2018. Generally, the Danish legislation does not differ substantially from PSD 2. However, in certain areas the Danish implementation law goes further than the minimum obligations in PSD 2 in relation to having sufficient consumer protection and keeping existing Danish payment solutions in tact, especially regarding the national debit card ‘Dankortet’.
In short, the areas concerned are:
- Rules concerning payment institutions and e-payment institutions management and organization of such institutions, especially the obligation to have an arrangement for their employees to be able to report any possible breach of the law committed by the institution
- Rules on good business practice
- The obligation to provide information of any surcharges prior to the execution of a transaction
Furthermore, some of the optionality provided for in PSD 2 has been used in the Danish implementation law. This is the case for:
- Article 32 – exemption for smaller payment service providers from part of the procedure and conditions
- Article 42 and Article 63 – doubling the amounts set out in the PSD 2 for the value of individual payment transactions, spending limit and store funds according to the framework contract for low-value payment instruments and electronic money
- Article 74 – reducing liability for unauthorized payment transactions in favor of the consumer
In Finland, PSD 2 will be transposed in two par ts. Titles III and IV are implemented by changes to the Finnish Payment Services Act and titles II, IV and VI by changes to the Finnish Payment Institutions Act.
The draft Finnish implementation acts and the draft explanatory notes were published in March 2017 (Payment Services Act) and July 2017 (Payment Institutions Act). Both drafts are subject to consultation. Thereafter, the Finnish legislator will present its final proposal for the changes to the respective acts and the parliament of Finland will decide on the proposal before the acts are final. It is intended that the legislation will be in force by the PSD 2 deadline of 13 January 2018.
Generally, the Finnish implementation does not go further than the directive and the existing legislation is amended only to the extent required by the implementation of PSD 2.
Some of the optionality provided for in PSD 2 has been used in the Finnish implementation, corresponding with the member state options applied initially in the implementation of the original Payment Services Directive (PSD) in Finland. The optionality has thus been exercised to the same extent as exercised in the implementation of PSD and PSD 2.
In short, the member state options include:
- Article 2 – exempting Finnvera Plc and Finnish Fund for Industrial Cooperation Ltd. (Finnfund) from the scope of PSD 2
- Article 3 – exempting services based on specific payment instruments valid only in Finland provided at the request of an undertaking or a public sector entity and regulated by a national or regional public authority for specific social or tax purposes to acquire specific goods or services from suppliers having a commercial agreement with the issuer of such specific payment instrument
- Article 8 – disapplying own funds requirement in relation to payment institutions which are included in the consolidated supervision of the parent credit institution
- Article 29 – requiring payment institutions having agents or branches in Finland to report to the Finnish Financial Supervision Authority on the activities carried out in Finland
- Article 32 – exempting smaller payment service providers from part of the procedure and conditions
- Article 109 – automatically granting authorizations and registry entries
Options included in Articles 29(4), 32(1) (national threshold) and 32(4) PSD 2 will not be exercised.
In Norway, PSD 2 will also be transposed in two parts. Titles III and IV are implemented by changes to the Norwegian Finance Contract Act and titles II, IV and V by changes to the Norwegian Financial Undertakings Act of 2015 and the Payment System Act of 1999. Norway is still in the early stages of the legislative process of implementing PSD 2. The draft implementation acts and draft explanatory notes in respect of the institutional rules in titles II, IV and VI were published in May 2017, subject to consultation and with a deadline to comment by mid-October 2017 and the other consultation paper in respect of titles III and IV on 7 September 2017 and with a deadline to comments by mid-December 2017.
The reason for this division is that the regulations come under two different ministries. According to market participants, it is difficult to respond properly to the draft implementation acts in respect of the institutional rules without seeing the other part of the draft proposal however, which is now recently published. PSD 2 must also be incorporated into the European Economic Area (EEA)-agreement as Norway is an EEA country. It does not seem likely that the deadline set by European Union for implementation of PSD 2 legislation will be met by Norway.
In short, the member state options dealt with in the draft implementation acts in respect of the governing business rules included:
- Article 2 – entities exempted from the scope – as the Capital Requirements Directive IV (CRD IV) is currently not incorporated into the EEA-agreement, the discretion to exempt certain entities from the scope in accordance with the CRD IV is not a relevant option for Norway
- Article 8 – disapplying the own funds requirement in relation to payment institutions which are included in the consolidated supervision of the parent credit institution (the Norwegian legislator has decided not to take advantages of this option)
- Article 32 – exempting smaller payment service providers from part of the procedure and conditions – the Norwegian legislator has proposed to continue the current regime for a limited payment service license and operating with the same threshold in respect of transactional volume
- Article 62 – the option to prohibit or limit surcharges at a later date – Under Norwegian law an empowering provision has been included which states that the legislator may, at a later stage, adopt a regulation to prohibit or limit surcharging. According to the explanatory notes of the draft implementation acts of Article 62, the legislator refers to the empowering provision set out in the current legislation and states that an introduction of a prohibition of surcharging will require a more comprehensive review. The draft implementation acts regarding the payment services, which has not yet been seen, will address the implementation of PSD 2, Article 62, paragraph 4
The Swedish government has not yet published any draft government bill. Until now, the government has only published an official report (SOU 2016:53, published on 31 August 2016). Generally, the official report’s proposition for new legislation does not go further than the directive and the existing legislation is proposed to be amended only to the extent required by the implementation of PSD 2. The report, however, proposes an implementation of the exclusion in Article 3(b) of PSD 2 that appears to be contrary to the wording and intention of PSD 2.
The official report proposes that some of the optionality provided for in PSD 2 should be used in the Swedish implementation, corresponding almost to the member state options exercised in the implementation of PSD in Sweden. The optionality is thus proposed to be exercised to a similar extent in the implementation of PSD and PSD 2. A notable difference is that cash-in-transit companies’ ‘counting services’ are proposed not to be exempted from the scope of the Payment Services Act (which is currently the case). Also, the report proposes that an exemption should be made from the scope of the Payment Services Act for payment transactions completed using mobile telephones or other technological devices, for example when purchasing an electronic ticket for a journey. One condition for such transactions being exempted is that the cost of the transaction is not to exceed an amount corresponding to €50.
Additional optionality which Sweden proposed to exercise includes:
- Article 29 – the report proposes that foreign payment institutions operating in Sweden through agents or branches be required to submit information on their activities in Sweden at the request of Finansinspektionen or the Riksbank and that payment institutions headquartered in another member state and operating in Sweden through agents be required to appoint a central contact point in Sweden if Finansinspektionen deems this necessary
As mentioned, the proposed implementation of the exclusion in Article 3(b) of PSD 2 appears to be contrary to the wording and intention of PSD 2. According to Article 3(b) of PSD 2, the directive does not apply to payment transactions from the payer to the payee through a commercial agent authorized via an agreement to negotiate or conclude the sale or purchase of goods or services on behalf of only the payer or only the payee, whereas according to the Swedish Official report’s proposal to Chapter 1, Section 7, the Payment Services Act does not apply to payment transactions from the payer to the payee through a ‘handelskommissionär’ ie a legal figure that in Swedish law refers to a person who buys or sells movable property in ie its own name, but on behalf of someone else, in the course of a business.
Otherwise, there have not been any other noted deviations in the official reports proposal for new legislation.