Vulcan Insight | EU Commission proposes update to EU payments infrastructure

On 28 June 2023, the European Commission proposed new measures that will modernise and update how Europeans pay for goods and services. The new rules, put forward under the Financial Data Access proposal and the revision of the Payment Services Directive (PSD3) will improve competition in electronic payments, improve consumer protection and empower consumers to share their data in a secure way.   

The Financial Data Access proposal (FIDA) will establish clear rights and obligations to manage customer data sharing in the financial sector. With this proposal, the Commission’s goal is to give people more power over the data the retail financial sector gathers on aspects like customers’ cash holdings, investments and insurance policies.

This will press financial firms to create clear dashboards that give their clients more transparency on their data. Individuals will then be able to share observed data with fintechs and other companies, which in turn will modify and create new services to benefit the public. The proposed measures will allow for companies and data-holders to provide data access at a cost, being able to charge a fee to companies that want access.

Additionally, the Commission has also proposed its latest update to the Payment Services Directive – PSD3. PSD2, adopted in 2015, sets out the main guidelines for all retail payments in the EU. It further addressed barriers to new methods of payment services and benefited consumers through increased security and fraud protection.

The PSD2 review observed an increase in electronic payments from €184.2 trillion in 2017 to €240 trillion in 2021, as well as new fraud related threats.

The revised PSD2, known as PSD3, focuses on fixing issues with the pre-existing text and strengthening the safeguards against fraud. Within the new safeguards are measures that will allow payment companies to observe individual’s online behaviour when showing the intention of making a purchase in order to better and more accurately detect potential fraud. This will be ensured using the location and type of device making the purchase, as well as the time of transaction and spending habits of the user.

The Commission’s revised measures include the following:

• Measures to help prevent and combat payment fraud.
• Granting non-bank payment service providers (PSP) access to all EU payment systems.
• Removing obstacles to improve the functioning of open banking services and consumer control.
• Improving the availability of cash

The Commission’s evaluation reached a general consensus that PSD2 was, to a certain degree, successful in meeting its objectives. Notably in areas around fraud prevention, transparency, and consumers choice of payment instruments. PSD3 will build on the lessons learned from open banking, and on the key principles for data access and processing.