On July 24, 2013, the European Commission adopted the new payment Services Directive (“PSD2″) and a proposal for regulation on interchange fees for card-based payment transactions, in order to adapt EU payments market to the opportunities of the single market and to support the growth of the EU economy.
The Payment Services Directive (PSD), adopted in 2007, brought substantial benefits to the European economy in easing market entry for new actors, namely payment institutions, thereby increasing competition and offering more payment choices to consumers. It has facilitated economies of scale and the operational implementation of the Single Euro Payments Area (SEPA). The PSD has also enhanced transparency for consumers through its information requirements for payment services providers (execution time, fees) and it has reinforced the rights and obligations linked to payment services (shorter execution time, refund rights, liability of consumers and payment institutions).
However, the European Commission decided to adopt a revised a Payment Services Directive (“PSD2″) because the Payment Services Directive revealed that some of its provisions needed to be modernized to take account of new types of payment services, such as payment initiation services offered in the context of e-commerce.
Therefore, the main objectives of the PSD2 are to:
Contribute to a further integrated and efficient European payments market;
- Improve the level playing field for payment service providers (including new players);
- Ensure a high level of consumer protection and of payments security;
- Encourage lower prices for payments;
- Facilitate the emergence of common technical standards and interoperability.
Hence, the revised Payment Services Directive (“PSD2”) introduces new important elements and improvements to the EU payment market.
In particular, this new Directive should facilitate and render more secure the use of low cost internet payment services by including within its scope new so-called payment initiation service, which operate between the merchant and the purchaser’s bank, allowing for cheap and efficient electronic payments without the use of a credit card.
The new rules should provide for a high level of payment security over the internet. Under the PSD2, payment service providers, be they banks, payment institutions or TPPs, will now be subject to the same high standards of regulation and supervision as all other payment institutions. At the same time, banks and all other payment service providers will need to step up the security of online transactions by including strong customer authentication for payments.
In addition, under the PSD2, consumers should be better protected against fraud, possible abuses and payment incidents (e.g. in case of disputed and incorrectly executed payment transactions). Consumers may be required to face only very limited losses – up to a maximum of 50 EUR (vs 150 EUR currently)- in cases of unauthorized card payments.
Moreover, the PSD2 enhances consumer protection and sets out the “unconditional refund right” for consumers. This means that consumers would be allowed to ask for an unconditional refund even in the case of a disputed payment transaction. The only exceptions to this unconditional refund right will relate to cases where the merchant has already fulfilled the contract and the corresponding good or service has already been consumed (e.g. a downloaded film has already been watched).
Consumers should also gain a stronger position in case of disputes with their bank and other payment service providers: the new rules will oblige banks to answer in written form to any complaint within 15 business days.
Furthermore, PSD2 will contribute to the reduction of charges paid by consumers for card payments. In fact, the Regulation on interchange fees, combined with the revised PSD, will introduce maximum levels of interchange fees for transactions based on consumer debit and credit cards and ban surcharges on these types of cards.
During a transition period of 22 months, caps on interchange fees for debit and credit cards will apply to cross-border transactions, i.e. when a consumer uses his card in another country, or when a retailer uses a bank in another country. Thereafter these caps will also apply to domestic transactions. The caps are set at 0.2% of the value of the transaction for debit cards and 0.3% for credit cards.