Payment Services Directive
Encyclopedia
The Payment Services Directive (PSD, 2007/64/EC) is a regulatory initiative from the European Commission (Directorate General Internal Market)
which will regulate payment services and payment service providers (as defined in the Directive) throughout the European Union
(EU) and European Economic Area
(EEA).
The purpose is to increase pan-European competition and participation in the payments industry (also from non-banks), as well as to provide for a level playing field by harmonising consumer protection and the rights/obligations for payment providers and users.
The final adopted text of the Directive (2007/64/EC) was officially published on 5 December 2007, to be transposed into national legislation by all EU (and EEA) Member States by 1 November 2009 at the latest. Although the PSD is a maximum harmonisation
Directive, certain elements still allow for different options/choices by individual countries.
– EPC ) which defines the harmonisation of payment products, infrastructures and technical standards (Rulebooks for Credit Transfer
/Direct Debit
, BIC
, IBAN
, ISO 20022
XML message format, EMV
chip cards/terminals), the PSD is driven by regulators and provides for the necessary legal framework within which all payment service providers will operate.
The PSD contains two main sections: the market rules for payment service providers and the business conduct rules.
The market rules defined in the PSD describes which type of organisations can provide payment services. Next to credit institutions (i.e. banks) and certain authorities (e.g. Central Banks, government bodies), the PSD mentions Electronic Money Institutions (EMIs), created by the E-Money Directive (EMD) in 2000, and also creates the new category of Payment Institutions with its own prudential regime rules. Organisations that are not credit institutions or EMIs, can apply for an authorisation as a PI (certain capital and risk management requirements apply) in any EU country of their choice (where they are established) and then passport their payment services into other Member States across the EU without additional PI authorisation requirements.
The business conduct rules specify the requirements around transparency of information to be provided by payment service providers to payment users, including any charges, exchange rates, transaction references and maximum execution time. It also stipulates the rights and obligations for both payment service providers and users, including how to authorise and execute transactions, liability in case of unauthorised use of payment instruments, refunds on payments, revoking payment orders, maximum execution time and value dating of payments.
Each country must designate a Competent Authority to provide prudential supervision of the PIs and to monitor compliance with the business conduct rules, as transposed into national legislation.
Directorate-General for Internal Market and Services (European Commission)
The Directorate-General for Internal Market and Services is a Directorate-General of the European Commission. The main role of the DG Internal Market and Services is to coordinate the European Commission’s policy on the European Single Market, which aims to ensure the free movement of people,...
which will regulate payment services and payment service providers (as defined in the Directive) throughout the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
(EU) and European Economic Area
European Economic Area
The European Economic Area was established on 1 January 1994 following an agreement between the member states of the European Free Trade Association and the European Community, later the European Union . Specifically, it allows Iceland, Liechtenstein and Norway to participate in the EU's Internal...
(EEA).
The purpose is to increase pan-European competition and participation in the payments industry (also from non-banks), as well as to provide for a level playing field by harmonising consumer protection and the rights/obligations for payment providers and users.
The final adopted text of the Directive (2007/64/EC) was officially published on 5 December 2007, to be transposed into national legislation by all EU (and EEA) Member States by 1 November 2009 at the latest. Although the PSD is a maximum harmonisation
Maximum harmonisation
Maximum harmonisation is a term used in European Union law.If a piece of law , is described as maximum harmonisation, that means that national law may not exceed the terms of the legislation...
Directive, certain elements still allow for different options/choices by individual countries.
Overview
Whereas SEPA (Single Euro Payments Area) is a self-regulatory initiative by the banking sector of Europe (represented in the European Payments CouncilEuropean Payments Council
The European Payments Council was founded in 2002. It calls itself "the decision-making and coordination body of the European banking industry in relation to payments". The main task of the EPC is the development of the Single Euro Payment Area. The 74 members are banks and banking associations....
– EPC ) which defines the harmonisation of payment products, infrastructures and technical standards (Rulebooks for Credit Transfer
Wire transfer
Wire transfer or credit transfer is a method of electronic funds transfer from one person or institution to another. A wire transfer can be made from one bank account to another bank account or through a transfer of cash at a cash office...
/Direct Debit
Direct debit
A direct debit or direct withdrawal is an instruction that a bank account holder gives to his or her bank to collect an amount directly from another account. It is similar to a direct deposit but initiated by the beneficiary...
, BIC
ISO 9362
ISO 9362 is a standard format of Business Identifier Codes approved by the International Organization for Standardization . It is a unique identification code for both financial and non-financial institutions...
, IBAN
International Bank Account Number
The International Bank Account Number is an international standard for identifying bank accounts across national borders with a minimal risk of propagating transcription errors. It was originally adopted by the European Committee for Banking Standards , and was later adopted as an international...
, ISO 20022
ISO 20022
ISO 20022 or UNIFI is the ISO Standard for Financial Services Messaging. It describes a Metadata Repository containing descriptions of messages and business processes, and a maintenance process for the Repository Content....
XML message format, EMV
EMV
EMV stands for Europay, MasterCard and VISA, a global standard for inter-operation of integrated circuit cards and IC card capable point of sale terminals and automated teller machines , for authenticating credit and debit card transactions.It is a joint effort between Europay, MasterCard and...
chip cards/terminals), the PSD is driven by regulators and provides for the necessary legal framework within which all payment service providers will operate.
The PSD contains two main sections: the market rules for payment service providers and the business conduct rules.
The market rules defined in the PSD describes which type of organisations can provide payment services. Next to credit institutions (i.e. banks) and certain authorities (e.g. Central Banks, government bodies), the PSD mentions Electronic Money Institutions (EMIs), created by the E-Money Directive (EMD) in 2000, and also creates the new category of Payment Institutions with its own prudential regime rules. Organisations that are not credit institutions or EMIs, can apply for an authorisation as a PI (certain capital and risk management requirements apply) in any EU country of their choice (where they are established) and then passport their payment services into other Member States across the EU without additional PI authorisation requirements.
The business conduct rules specify the requirements around transparency of information to be provided by payment service providers to payment users, including any charges, exchange rates, transaction references and maximum execution time. It also stipulates the rights and obligations for both payment service providers and users, including how to authorise and execute transactions, liability in case of unauthorised use of payment instruments, refunds on payments, revoking payment orders, maximum execution time and value dating of payments.
Each country must designate a Competent Authority to provide prudential supervision of the PIs and to monitor compliance with the business conduct rules, as transposed into national legislation.
Key dates
- March 2000: Through the Lisbon Agenda Europe’s leaders decide to make Europe “the world’s most competitive and dynamic knowledge-driven economy” by 2010
- December 2001: Regulation EC 2560/2001 on cross-border payments in euro
- 2002: Creation of the European Payments Council (EPC) by the banking industry, driving the Single Euro Payments Area initiative to harmonise the main non-cash payment instruments across the Euro area (by end 2010)
- 2001–2004: Consultation period and preparation of a Directive to create a New Legal Framework for payment services in the EU
- December 2005: Proposal for Directive by DG Internal Market Commissioner McCreevy
- 5 December 2007: Official publication of the adopted Payment Services Directive
- 1 November 2009: deadline for implementation of PSD in national legislation
Key implications
- Removal of barriers to access by payment service providers to any EU country (cross-border service offering becomes much easier)