Innovations in PSD3 and PSR from ECON Reports

Innovations in PSD3 and PSR from ECON Reports

The proposals for the Payment Services Directive 3 (“PSD3”) and the Payment Services Regulation (“PSR”) continue to take shape. The European Parliament’s Committee on Economic and Monetary Affairs (“ECON”) recently voted on the Commission’s drafts of the two legislative texts. The reports of the plenary session of ECON and the corresponding amendment proposals of ECON on the Commission drafts of PSD3 and PSR are now available.

ECON brings simplification of authorisations into play

Under the ECON’s proposed amendments, existing payment and e-money institutions do not have to apply for a new licence, but only have to prove their PSD3 compliance as part of a simplified procedure.

According to the ECON proposals, independent ATM operators will still have to undergo a registration procedure with the respective national supervisory authority, although they will not have to undergo an authorisation procedure.

According to the ECON proposal, the processing times of the supervisory authorities for processing applications for authorisation as a payment institution will be reduced to two months (three months were envisaged in the Commission drafts) from receipt of all information required for the decision.

Obligation to give reasons for refusal of accounts for payment institutions

The possibility for payment institutions to open safeguarding accounts with a central bank is supplemented by an obligation for the respective central bank to justify its refusal to open a safeguarding account to the payment institution concerned. The same obligation should apply to credit institutions if they refuse to open an account for a payment institution or close the account of a payment institution.

Better access to cash

The amount for the provision of cash in retail stores is to be increased from 50 euros to 100 euros per transaction. However, a customer authentication procedure is to be used for each cash withdrawal, meaning that anonymous cash withdrawals will not be possible.

Access to NFC technology on mobile devices

The ECON also wants to make providers of mobile devices and communication services responsible for facilitating the processing of digital payments. In future, providers of payment services should be authorised to store software on the hardware of the relevant mobile devices in order to enable payment transactions to be processed both online and offline. Manufacturers of mobile devices and providers of electronic communications services should be obliged to grant payment service providers access to all hardware and software components required for the processing of online and offline transactions on fair, reasonable and non-discriminatory terms.

No specification of IBAN for name matching

With regard to the newly introduced name matching of the payee, ECON clarifies that, in addition to the IBAN, other identifiers can also be used for the comparison with the name of the payee (e.g. tax number or LEI of the payee).

Fraud prevention

One focus of the ECON’s proposed amendments is on strengthening fraud prevention. The following are just a few examples of the amendments proposed in this context:

It is envisaged that institutions must set up a communication channel through which the payment service user can make a notification, request unblocking of their payment instrument and report a fraudulent transaction. The payment service user should also receive qualified advice via this communication channel if he suspects that he has been the victim of fraud. The payment service user should also be able to use this communication channel to report problems when making payments, for example in the event of incorrect payment transactions at ATMs.

When authorising payment transactions, the payer’s authorisation declaration should indicate that the payer has granted the authorisation on the basis of all necessary knowledge relating to the respective transaction, including the transaction amount, the payee and the purpose of the transaction. It remains to be seen whether this requirement will lead to an institution having to obtain additional information from the payer in order to carry out a payment transaction in future (e.g. mandatory indication of the purpose of a transfer).

According to the ECON, operators of online platforms should be liable for fraudulent payment transactions if fraudsters have used the respective online platform to defraud consumers, the operator of the respective platform was aware of the use of its online platform for fraudulent purposes and did not take any measures against this.

What happens next?

The European Parliament is expected to discuss and vote on the ECON’s proposed amendments to the Commission’s drafts in the second quarter of this year. Negotiations between the European Parliament and the Council of the European Union on the drafts for PSD 3 and the PSR are expected to begin after the European elections in June of this year.

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