The pitfalls of the Payment Services Directive

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

The EU’s Payment Services Directive (PSD) is in danger of “creating a legislative labyrinth,” warns Professor Maria Chiara Malaguti in a recent paper for the European Credit Research Institute (ECRI).

The professor of law argues that since regulation of payment services is such a complex subject it needs to be supported “by a more solid conceptualisation” of key elements. 

In Malaguti’s view, the PSD contains numerous “inconsistencies” that emanate from its originality: “it is an exercise that is new for regulators and legislators and as yet has no exact correspondent in any legislative effort outside the EU”. 

Whatever its innovative merits, the directive must be reviewed because it risks proving inconsistent with the acquis communantaire, says Malaguti. 

If the legislation is left as it is, the lack of legal clarity will cause “ambiguities” in the interpretation of the PSD, she warns. 

It fails to properly define “exactly what a payment service is,” since it simply “lists a number of activities,” she argues. Failure to define “payment service” further prevents “any consistent conceptualisation,” which would help “develop a clear framework for regulation”. 

All this ambiguity allows for “potential discrepancies” in interpretations at national level, claims Malaguti. 

Community law could be undermined by the “numerous and relevant derogations from the directive by domestic regulation,” which “might further compromise the general framework of the payments system in the EU,” warns Malaguti. 

She concludes that “the vagueness and inconsistencies that are described in this paper leave some doubt that the actual regulation is sufficiently equipped to cope with the modernity and complexity of this ‘newly-born’ financial service”. 

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