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Insiders expect the European Commission to release its proposed revisions to the Payment Services Directive, a possible Payment Services Regulation, Open Finance framework, Late Payments Directive, as well as new digital euro legislation, all on the same day in June.
Industry insiders have told VIXIO that the European Commission is readying itself to publish a stack of new regulations on June 28.
Policymakers have been working on revising the EU’s payments legislation for more than a year.
There is the usual caveat that this could all be postponed, with one lobbyist quipping she was concerned her annual leave could be cancelled if the commission were to push these changes back a week into July — a common occurrence among European policymakers.
However, others said the commission knows that this is the last opportunity to gain traction with the legislation before the European Parliament elections in May.
With much of the EU legislation already having made progress, there is a strong incentive to maintain momentum, fearful of slipping into development hell in case a very different set of politicians take their seats in Espace Léopold in Summer 2024.
“This is the very, very last opportunity to bring it out and make good progress,” said one source.
In some instances, such as with the digital euro legislation, there have already been delays. The legislation at one point was penned for March, then it slipped to May and now it is expected to be unleashed in a cluster of other payments documents.
Some sources in Brussels also suggested that there had been a clash over the digital euro legislation, with claims that the European Central Bank (ECB) has been actively involved in trying to write the legislation, eventually leading policymakers in the European Commission to tell them, as one source said, to “back off”.
What should concern the ECB is that enthusiasm in Brussels for a digital euro is minimal. Parliamentarians have so far been lukewarmly supportive, but reports commissioned by the Economic and Monetary Affairs Committee (ECON) have been far from a ringing endorsement.
If all this does happen as planned, June 28 looks set to be a chaotic day for payment firms around Europe.
Unpacking the directive
The revisions to the Payment Services Directive have always been anticipated to be released in June, but lobbyists have noted that the European Commission has so far been tight-lipped regarding details.
Some suggest that this could mean it still has not made up its minds fully on the approach to take, while others have argued that this could mean further change.
“We usually see a leak a week beforehand to check everything is ok,” joked one source.
Although nobody knows what will feature in the revised legislation, people are anticipating that it will merge the Payment Services Directive and E-Money Directive.
There is also a chance that it will bring in elements of the Payment Accounts Directive, of which the commission recently completed its review.
What will also surprise some is the shift in tone from the commission.
It is now anticipated that its revisions could include a regulation, which is either combined with a directive or standalone.
The commission has done this before. For example, the EU’s financial crime package in 2021 included both a directive and a regulation to tackle anti-money laundering in the trading bloc.
Some in Brussels have said that they anticipate that there would be no revised directive and simply just a regulation, but Eric Ducoulombier, the EU civil servant leading the work on the legislation, is thought to have hinted at public events recently that there will be both regulation and a directive.
"These aspects could be related to the direct application, as there is no option for member states,” explained Andrea De Matteis, a partner at De Matteis Law.
He pointed out that a directive requires more time to implement, so member states fall behind and the single market does not proceed as harmoniously.
“It is possible that many rules will be in a regulation form instead."
One area that this could be suitable is surcharging, whereby a fee is charged for the use of a particular payment method, most typically for a debit or credit card.
"Member states have the option to ban surcharges in the directive currently, and this has created a patchwork,” he said.
Member states such as Italy, for example, do not surcharge.
“This type of system creates confusion, and we have seen online travel agents try to leverage this regulatory arbitrage against airlines, for example,” said De Matteis.
An area that sources do not anticipate to be significantly overhauled, meanwhile, is strong customer authentication (SCA).
This is in spite of some feedback to the commission, such as from the European Banking Authority (EBA), suggesting that SCA should be expanded.
The feeling on the ground among lobbyists in Brussels is that the commission understands that SCA was only introduced recently and it would cost a lot of money to make further changes after the amount of time taken preparing for the compliance requirement.
"SCA will likely remain in the directive,” anticipated De Matteis. “SCA changes at this time would be a very drastic decision, so it is possible that there will be an evolution, not a revolution here.
“The biggest change I’d like to see is merchants sharing more data with issuers because this will increase security,” he said.
For example, this includes information such as cardholder names, IP addresses and billing addresses.
There is also a sense among some that the coverage of payments players will be expanded in the revisions.
This could include those who are currently unregulated, such as wallet providers like Apple Pay and Google Pay.
Additionally, there is a possibility that merchants may end up more in scope.
“Many unregulated players now have a role in payments, as you can see with SCA and merchants,” De Matteis pointed out.
Merchants that are not complying with SCA cannot be fined by authorities. This means that the only way to enforce is through the acquirer.
“It is hard for the acquirer to enforce something against their client, so it is only a contractual link now that allows for order to be in place,” he explained.
Open Finance
The EU’s hotly anticipated foray into open finance is also due to be set out on June 28.
Open finance will allow third parties to gain permissioned access to a wider set of financial data.
This expansion would cover almost all services, applications and relevant data in the financial sector, such as data on bank deposits, insurance contracts and securities accounts.
Similar to open banking, access to customer data will likely be achieved via technical interfaces.
However, these application programming interfaces (APIs) may be accessible at a premium, which would differ with the approach taken to open banking thus far.
As with the EU’s payments work, it is yet unknown what kinds of plans the commission has.
A few sources so far have suggested that the teams working on the Open Finance proposal and the Payment Services Directive proposal have been working completely separately, with one claiming that those focusing on open finance “don’t want to be tarnished” by what they perceive as failures with the EU’s payments regulation.
"What we want to see is alignment between all of the work that has happened in the open banking space,” said Nilixa Devlukia, chair of the Open Finance Association.
Devlukia continued that if open finance is optional, then there could be problems. “Given the experience we've had and the challenge we have with commercial models, it will likely struggle to get off of the ground."
For the Payment Services Directive revisions, meanwhile, she suggests that there needs to be a baseline of exactly what is provided at no charge to third-party providers via well-functioning APIs.
“This means that you can have a better conversation about the commercial space and move forward with the work under SPAA MSG,” she said, referencing the European Payments Council’s open data project.
“A baseline overcomes the fragmented implementation that we see across Europe and mandated high-performing APIs negates any need for screen scraping to continue,” said Devlukia. “Access for Open Finance should avoid screen scraping and be API only.”
With this all about to be unveiled by the European Commission, and not to mention the small business-focused Late Payments Directive, the payments insiders of Brussels are waiting with bated breath to see just how much the commission wants to refit current regulation.
