McGuinness Outlines Central Themes For PSD2 Overhaul

February 8, 2023
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The EU’s financial services commissioner has added further detail to what Brussels is looking to possibly change in its overhaul of the revised Payment Services Directive (PSD2).

The EU’s financial services commissioner has added further detail to what Brussels is looking to possibly change in its overhaul of the revised Payment Services Directive (PSD2).

Among payments lobbyists, there is a growing concern that the EU’s time to propose and negotiate new payments regulation could be thwarted due to next year’s elections.

Many will welcome Mairead McGuinness', the European Commission’s banking and finance chief, latest update which provides further details on what the commission is planning to adjust in the upcoming regulation and when it expects to publish it.

According to McGuinness, the commission is currently reviewing the directive along four main themes:

  • Preventing fraud.
  • Improving implementation and enforcement.
  • Making sure there is a level playing field between banks and other providers in access to payment services.
  • Open banking.

“The Second Payment Services Directive set out the foundation for Open Banking,” she said while speaking at Afore Consulting’s Annual Fintech and Regulation Conference. “It allows payment account data to be shared with another provider, with a customer's consent.”

The review will also lay the basis for Brussels’ work on open finance, she confirmed.

“Both pieces of work are scheduled for the second quarter of this year,” McGuinness, who has been part of EU politics since 2004, said.

“Data is at the heart of our financial system, now more than ever. With open finance, we want to put the customer in control of their data,” she said. “Put simply, we want to enable more services based on data, while making sure customers know what data they are sharing and who it is being shared with.”

This, for McGuinness, could mean small businesses getting a quicker answer on a loan application, based on sharing financial data with a bank, or it could mean more personalised insurance offers based on a wider set of data.

The commissioner went on to say that some of the considerations being mulled in Brussels include:

  • What data will be included in the scope?
  • How will that data be standardised?
  • What will the model of compensation look like?
  • What does a level playing field look like?

“To be very clear, it will require strong safeguards on personal data. Information should only be shared with a third party subject to the consent of the customer,” she said. “Customers should always have the right to withdraw access to their data.”

Céu Pereira, who serves as retail payments leader in McGuinness' department, also spoke about PSD2 plans at the conference.

She told viewers that the four chosen areas had been identified through its public consultation that was carried out last year, as well as feedback from others, such as the European Banking Authority.

“One of the issues that we identified as being important to ensure the objective of the market being competitive and innovative is open banking, so our objective is making sure that open banking reaches its full potential and draws lessons from the PSD2 review.”

Based on obstacles to further development that have been seen in the market, Pereira said that the PSD2 review will fully address these issues.

“We are currently working on the legislative proposal to make this a reality based on the impact assessment that we just delivered to the regulatory scrutiny board,” she said, making reference to the commission’s independent body for scrutinising legislative proposals.

She also discussed fraud, noting that in particular the commission wants to target authorised push payment fraud.

“This is a problem that has become more prominent after the full implementation of SCA [strong customer authentication], as SCA addresses to a large extent the problems of fraud that were identified in the framework of PSD2,” she noted.

“Fraudsters move to areas that are less regulated than this, so this is now the key problem that is emerging.”

What also may please payments people is that Pereira confirmed that the next iteration of payment services regulation should allow non-banks to participate directly in European payment systems.

This has been heavily hinted at by the commission since the 2020 Retail Payments Strategy was released.

However, some have expressed concern that by including access to payments systems in a possible PSD3, it could take much longer for that to become a reality.

Rather, some stakeholders have indicated that a preferable option would be an amendment to the Settlement Finality Directive, which it is believed would be able to be implemented faster.

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