PSD3: What you need to know

Key changes:

• Payment Services Directive 3 (PSD3) is an updated version of Payment Services Directive 2 (PSD2) and provides rules on the efficiency and security of electronic/digital payments and financial services in the EU. It aims to improve competition and innovation in the financial industry.

• PSD3 sets out more extensive Strong Customer Authentication (SCA) regulations and stricter rules on access to payment systems and account information.

• PSD3 aims to protect consumers’ rights and personal information while improving competition in the payments industry. 

• The new proposals also include a new Payment Services Regulation (PSR) to improve consumer protection. This will be directly applicable to EU member states.

• Timeline: There is yet to be a clear timeline for implementing PSD3 and PSR. The finalized versions might be accessible by late 2024. The member states usually receive an 18-month transition period, suggesting that PSD3 and PSR could take effect around 2026.

Since introducing the previous Payment Services Directive (PSD), the EU payment services market has experienced significant transformations. This is due to the rise of electronic payments and the entry of new providers offering open banking services. 

The main objective of the last Payment Services Directive (PSD2) was to ensure a level playing field between existing and new providers of card, internet, and mobile payments. 

Due to developments in the market, the rules and regulations around payments were calling for an update. On June 28, the European Commission put forward proposals to bring payments and the wider financial sector further into the digital age. These proposals will amend and modernize PSD2, which will become PSD3, and introduce a Payment Services Regulation (PSR). 

This blog provides a high-level overview of the European Commission’s Payment Services Directive 3 (PSD3) proposals, how they compare to PSD2, and how this will impact the payments industry.