This article needs to be updated.(March 2014)
The Payment Services Directive (PSD, Directive 2007/64/EC, replaced by PSD 2, Directive (EU) 2015/2366) is an EU Directive, administered by the European Commission (Directorate General Internal Market) to regulate payment services and payment service providers throughout the European Union (EU) and European Economic Area (EEA). The Directive's purpose was to increase pan-European competition and participation in the payments industry also from non-banks, and to provide for a level playing field by harmonizing consumer protection and the rights and obligations for payment providers and users.
The SEPA (Single Euro Payments Area) is a self-regulatory initiative by the European banking sector represented in the European Payments Council, which defines the harmonization of payment products, infrastructures and technical standards (Rulebooks for credit transfer/direct debit, BIC, IBAN, ISO 20022 XML message format, EMV chip cards/terminals). The PSD provides the legal framework within which all payment service providers must operate.
The PSD's purpose in regard to the payments industry was to increase pan-European competition with participation also from non-banks, and to provide for a level playing field by harmonizing consumer protection and the rights and obligations for payment providers and users. The PSD's purpose in regard to consumers was to increase customer rights, guarantee faster payments (no later than next day from 1 January 2012 on), describe refund rights, and give clearer information on payments. Although the PSD is a maximum harmonisation directive, certain elements allow for different options by individual countries.
The PSD contains two main sections:
Each country had to designate a 'competent authority' for prudential supervision of the PIs and to monitor compliance with business conduct rules, as transposed into national legislation.
The PSD was updated in 2009 (EC Regulation 924/2009) and 2012 (EU Regulation 260/2012). An implementation report from 2013 found the PSD facilitated "provision of uniform payment services across the EU" and reduced legal and production costs for many payment service providers and that "the expected benefits have not yet been fully realised". The same report found the 2009 update "... to be functioning well. For example, charges for 100 EUR transfers followed a further downward trend to 0.50 EUR euro-area average for transfers initiated online and remained low, at 3.10 EUR for transfers initiated at the bank counter ".
On October 8, 2015, the European Parliament adopted the European Commission proposal to create safer and more innovative European payments (PSD2, Directive (EU) 2015/2366). The new rules aim to better protect consumers when they pay online, promote the development and use of innovative online and mobile payments such as through open banking, and make cross-border European payment services safer.
Commissioner Jonathan Hill, responsible for Financial Stability, Financial Services and Capital Markets Union, said, "This legislation is a step towards a digital single market; it will benefit consumers and businesses, and help the economy grow."
The EU and many banks are pushing this development with the new Payments Service Directive 2 (PSD2), which has come into force on 13 January 2018. Banks need to adapt to these changes that open many technical challenges, but also many strategic opportunities, such as collaborating with fintech providers, for the future.
PSD2 does not specify the actual machine-to-machine API standards and specification details to be used. The banks and other financial institutions had to agree upon such details to ensure interoperability. The 'Berlin Group', a pan-European payments interoperability standards and harmonisation initiative with the primary objective of defining open and common scheme- and processor-independent standards in the interbanking domain between Creditor Bank (Acquirer) and Debtor Bank (Issuer), has worked on complementing the work carried out by e.g. the European Payments Council. As such, the Berlin Group has been established as a pure technical standardisation body, focusing on detailed technical and organisational requirements to achieve this primary objective.
The Open Bank Project, established in 2010 by TESOBE, provides open standards and open source technology to support PSD2 and Open Banking. It provides public "sandboxes" such as https://psd2-api.openbankproject.com/ where developers can try APIs using simulated data.
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