Payment Services Directive: The new payments landscape

-A +A

The Payment Services Directive (PSD) was adopted by the EU Council of Ministers in March 2007, but an explosion in e-commerce through the internet and the ownership and use of smartphones has taken place since then. In response to the challenge posed by technology to traditional payments methods, the Commission published a green paper called: ‘Towards an integrated European market for card, internet and mobile payments,’ as a precursor to further rules changes. Following a consultation period an updated Payment Services Directive (PSD II) was published this summer (July 24), with a separate regulation on multilateral interchange fees (MIFs).

Horizontal Tabs

Overview

At the end of 2005, the then Internal Market Commissioner, Charlie McCreevy, launched a legislative initiative to remove obstacles in EU payment markets.

After months of fierce debate, the Payment Services Directive (PSD) was adopted by the EU Council of Ministers in March 2007. The dispute pitted the UK and Sweden against the Mediterranean bloc of France, Italy and Spain. The former trumpeted a more liberal approach to regulatory requirements for non-bank service providers, while the latter fought for a stricter set of rules, in particular concerning the granting of credit.

The final deal obliged non-bank providers to limit the duration of cross-border credit conceded to 12 months, but did not introduce any time restrictions for national operations (see EurActiv 27/03/07).

Whilst the original PSD was being transposed, however, an explosion in e-commerce through the internet and the ownership and use of smartphones was under way. These have led to new payment applications, for example electronic purses, replacing wallets and physical cards, or virtual public transport tickets stored in a mobile phone. Online shopping in Europe accounted for €141 million in 2009 and was expected to rise to €190 million by 2014.

In January 2012 the Commission published a green paper called: ‘Towards an integrated European market for card, internet and mobile payments.’

This identified market access and entry for existing and new service providers, security and data protection, transparent pricing, standardisation and inter-operability between service providers as key issues.

Proposals to update the PSD were pusblished by the Commission in July 2013. At the same time the Commission is published a draft regulation on multilateral interchange fees (MIFs) levied when payments are made cross-border or within member states.

The PSD is often mentioned in the same breath as the Single Euro Payments Area (SEPA) but the two are in fact separate, because SEPA began as a voluntary initiative of the European banking industry. The industry created a consortium, the European Payments Council, to define how SEPA would work in practice.

Advertising