European Commission launches public consultation on PDS2
By Gaia Lamperti
The European Commission has launched a public consultation to gather information for its review of the second EU Payment Services Directive (PSD2) to address the surge of Big Tech, FinTechs and cryptoassets.
The Commission intends to “evaluate whether the scope, exclusions and definitions of the directive are still appropriate to ensure relevant market players are regulated, a level playing field exists and risks are sufficiently mitigated” on PSD2. In parallel to this consultation, the EU regulator also announced two other targeted consultations, one on technical matters related to PSD2 and one on Open Finance.
The consultations will stay open until August 2nd and comments may be submitted through the commission’s site to contribute to any possible legislative review of the PSD2. The consultations do not constitute the final position or any formal proposal from the European Commission, but they are usually a good indication of the most important areas for the regulator.
Why the consultation
The purpose of this public consultation is to gather evidence on the application and impact of the revised Payment Services Directive (PSD2) and to inform the Commission’s work on open finance. The Digital Finance Strategy and the Retail Payments Strategy announced the launch of a comprehensive review of the application and impact of PSD2 to assess whether legislation remains fit for purpose.
The aim of such a framework is to allow customer data beyond the scope of PSD2 to be shared and re-used by financial service providers for creating new and improved services, subject to customer agreement as well as the effective application of data protection rules and security safeguards.
If after the evaluation of the PSD2, the commission concludes that a revision is needed, it has several options at its disposal. From non-legislative measures, relying on voluntary measures, to limited or extensive amendments to the PSD2, and according to statements from some EU Commissioners, new rules and amendments are likely.
What is under scrutiny
The PSD2 has made payments in Europe easier since its inception in 2015, but it is also facing certain challenges, the commission explained in the report. The regulator highlighted four areas of particular interest that may be addressed in the new PSD3.
- New market players
- Fraud risks
- Data protection
- International transactions’ challenges
These concerns will lead to the assessment of PSD2 exemptions, and possible extension of regulation to currently unregulated activities such as payment transactions using cryptoassets, Buy Now Pay Later services, and other digital wallet services. Other changes may affect the safeguarding regime, the extension of execution timing in the European Economic Area and customer authentication requirements.
How does it work
Responses to the Main Consultation must be submitted by August 2, 2022, and they will be followed by more detail on the likely scope of future regulation in these areas, particularly after the European Banking Authority responds to the European Commission’s call for advice on thePSD2 review, which is due by June 30, 2022. This is likely to be followed by a substantive proposal for revisions to PSD2 in the form of a draft text of PSD3.
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