New Payments Services Directive 2 (PSD2)

psd2

The European Commission has proposed a revised Payments Services Directive (PSD2) and a Regulation on Multilateral Interchange Fees (MIFs) in order to cater to the needs of the European payments market. The proposed bills are intended to create more competition in the market which in turn should lead to innovation and higher security standards in the payments environment.

Payments Services Directive 2 (PSD2)

The European Commission has proposed a revised Payments Services Directive (PSD2) and a Regulation on Multilateral Interchange Fees (MIFs) in order to cater to the needs of the European payments market. The proposed bills are intended to create more competition in the market which in turn should lead to innovation and higher security standards in the payments environment.

What the PSD2 aims to change

The 4 main points the new legislative wants to affect are; to broaden the scope of the previous bill (PSD) by setting new rules on transparency of transactions and as such international transactions would extend to an EU part. Secondly the bill would allow for new market players as in Third Party Providers to give their customers a simple and cheap means of online payments and credit transfers. The third point would be to achieve a higher level of consumer protection, and this takes into consideration both customer data to which the Payment Service Provider will have to take all the necessary steps to ensure safe and secure payment environment, and also protecting customers after transaction has been made by allowing them to obtain an unconditional refund even for disputed payments with capped losses for unauthorized card payment. Finally the bills would tackle the interchange fees and reduce them to a justifiable level across the European Union in the amount of 0.2% of the transaction value for consumer debit cards and 0.3% for credit cards, which also helps consumers and businesses better understand what they are paying for.However, this unified pricing system with the 0.2% and 0.3% interchange fees might jeopardize international processing as the fees are not suitable for some industries. What is also left unknown is how these changes will affect merchants processing US Dollars or have target audiences outside of the European Union.

A change for all parties involved

The PSD2 should positively affect consumers as they will have better protection, broader choice of payment providers, transparent fees and ultimately cheaper payments due to the caps on the interchange fees.
Online businesses will benefit from the lower charges, by getting a clearer overview of the fees imposed by banks. They also have an opportunity to attract customers by enabling diversified payment options. Payment Institutions on the other hand will have a modern, straightforward legal framework that should erase any previous legal issues such as unclear or hidden interchange fees. Payment Processors that are working side by side with acquirers are not too keen of the new changes as the lower interchange fees will probably limit the income from acquiring. To counter this negative effect banks have set their sights on other sources to generate fresh revenue, such as including fees for individual customers and consultancy agreements with previous business partners.

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