Payment Services Directive - Overview

Overview

From the EC document: What it Means for Consumers EU-wide rules to increase your rights; Faster payments (From 1 January 2012, payment must be no later than next day); Refund rights; Clearer information on payments.

Technical Overview Whereas SEPA (Single Euro Payments Area) is a self-regulatory initiative by the banking sector of Europe (represented in the European Payments Council – 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.