Good news, surcharges for card payments will be banned!
We all resent paying these surcharges. In the vast majority of cases when PSD2 comes into force in Jan 2018, these charges will be a thing of the past.
For example, when booking flights, paying in a newsagent or for that car service. This will apply to domestic as well as cross-border payments for debit and credit card transactions both online and in shops. This is estimated to save consumers 730million Euros per year1.
What Is The Second Payment Services Directive (PSD2)?
It is a fundamental piece of payments-related legislation in Europe, which entered into force in January 2016 (with two years to get ready for going live in Jan 2018). PSD2 is the product of a review of the original Payment Services Directive (PSD) and requires Payment Service Providers (PSPs)2 to make a significant number of changes to existing operations. The Directive requires that all Member States implement these rules as national law by 13 January 20183.
Regardless of Brexit, the UK will still implement PSD2 as all current EU law will become UK law at time of separation.
PSD2 is a significant evolution of the existing regulation for the payments industry. It aims to increase competition in an already competitive payments industry, bring into scope new types of payment services, enhance customer protection and security and extend the reach of the Directive.
It will also enable businesses to obtain a consolidated view of consumers accounts and to use tools to analyse their transactions and spending patterns. This could be on an on-going basis or as one-off access in order to enable an affordability check to be carried out when applying for a mortgage or loan – think Open Banking from last month’s post!
The Original PSD
The first PSD was implemented in 2009 – reviewed in 2012 – provided the following benefits:
Increased competition, improved economies of scale, enhanced transparency, but more could be done to ensure a competitive playing field and reducing consumer risk, especially with the technological innovation which has taken place in the last 10 years.
Customer Protection & GDPR
PSD2 will build upon existing consumer protection rules to help protect consumers against fraud, possible abuses and payment incidents through enhanced security. This is where the interaction with to General Data Protection Regulations4 (GDPR) occurs. GDPR goes live in May 2018. With the kind of third party data sharing environment envisaged under PSD2 there are significate overlaps between GDPR & PSD2. It is great to see legislation working together to enhance the consumers experience.
PSD2 & Open Banking
In my view these two sets of legislation contain both similarities and differences. The main difference being Open Banking is UK focused and PSD2 is EU wide. PSD2 will go live in Jan 2018, with Open Banking being a phased approach with new releases developed and launched each quarter. This has already started with new services offered from Mar/Apr this year. Have you noticed any changes? Both open your banking transaction data to be analysed and assessed, however PSD2 leans more towards payment services and Open Banking towards the opportunities available in the wider market of financial products and creating a competitive environment with emphasis on customer needs.
Win-Win For Consumers!
With PSD2 and Open Banking generating much change in the banking and finance industry over the coming months and years. Security of personal data, the building of trust and transparency as to the liability will be key to the success of this and future change.
1 Source: European Commission
2 PSP – In order to have payments from your web site processed by the credit card networks you will have to apply to an approved Payment Service Provider, known as a ‘PSP’.
3 For more detailed information on PSD2: https://www.paymentsuk.org.uk/
4 GDPR Definition: A legal framework that sets guidelines for the collection and processing of personal information of individuals within the European Union (EU). https://ico.org.uk/for-organisations/data-protection-reform/
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