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PSD2 merges EC e-payment rules

European-licensed online gambling companies have been notified that the European Banking Authority (EBA) has requested the merger of its PSD2 supervisory framework with the EU's Electronic Money Directive.

In response to stakeholder input and the "growing saturation" of new fintech solutions serving European clients' digital transactions, the European Banking Authority (EBA), the EU's regulatory agency for financial services, has advocated the merging of its e-payment supervisory schemes.

PSD2 was sanctioned in September 2019 as the new EU framework for the monitoring and regulation of e-payments and digital payment services providers (PSPs) operating throughout the European Economic Area (EEA).

The European Commission (EC) requested the EBA to conduct a review of the PSD2 directive in light of the encroachment of new Fintech services on established PSPs services.

Upon conducting its analysis, the EBA concluded that, while some PSD2 aims were effective, the framework nevertheless faced considerable obstacles, as seen by the 200 suggested adjustments.

In light of this, the EBA proposed that PSD2 be integrated with the E-Money Directive in order to unify regulatory laws and standards on EEA transactions and enhance consumer safeguards.

Enhancing competition, supporting innovation, safeguarding consumer money and data, encouraging the development of user-friendly services, and combining PSD2 and the Electronic Money Directive were at the forefront of the EBA's ideas.

While the EBA has acknowledged some of the beneficial aspects of PSD2, it has also addressed a number of implementation-related problems.

It has taught employees to pay special attention to the provision of payment initiation services (PIS) and account information services (AIS), as well as new hazards that expose users to social engineering fraud.

Marca Wosoba, Managing Director, Europe, at Modulr, noted that suggestions for the consolidation of PSD2 and the Electronic Money Directive are "good news" for the simplification of the European payments environment.

“The EC’s proposal to enact the EBA’s call to merge PSD2 with the Electronic Money Directive is welcome news. Simplifying the regulatory landscape for payment businesses would create a more competitive and transparent environment that supports innovation and leads to better outcomes for European businesses and consumers.” – Wosoba commented

“This is a great opportunity for the EC to reduce friction and allow money to flow more easily through the European economy. If coupled with removing restrictions for non-credit institutions to be able to directly participate in settlement schemes, it will drive the significant change needed to create more stability and payment user choice.”

The European Commission's purpose in requesting a review of PSD2 was to collect evidence of the framework's effectiveness and its effects on business stakeholders since its introduction in 2018. The EBA was tasked with weighing the framework's overall merits against any difficulties it may have produced.

Significantly, the PSD2 framework was implemented amidst the fast rise of new Fintech businesses in the payment area, highlighting the relevance of a simple and safe framework within which financial firms may flourish as a vital European industry segment.

Dean Wallace, Director of Consumer Payments Modernisation at ACI Worldwide, emphasised his conviction that the consolidation of Europe's regulatory payments environment would be a beneficial development.

Nevertheless, he added, "it raises more concerns than it answers"; specifically, "can it solve the problem that PSD2 generated for banks with client loyalty and the consequent incursion of Big Tech on their turf?"

Wallace continued: “PSD2’s aim was to benefit merchants by making things cheaper, and consumers by creating more choice for digital convenience. In reality, we saw a sharp decrease in bank-led loyalty programmes as well as an increase of consumer choice.

“While Big Tech hasn’t fully entered the EU payments landscape, consumers are already happy to put the faith they need for payments into the hands of the tech brands they already trust. As such, there is a distinct possibility they could enter the space in a meaningful way, without regulatory scrutiny or cost of compliance, taking the banks’ already dwindling market share.

“While this is a good move from the EC and EBA, the ultimate questions around the future vision of European payments still need to be answered.”



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