Technological progress is increasingly changing the way banking and payments are provided. In addition to the ever-growing number of people using credit and debit cards, the rise of e-commerce and the increasing popularity of smart phones have paved the way for the emergence of new methods of payments in recent years. In response to these changes and the effect they are having on consumers’ payment habits, the European Commission proposed a payments package in July 2013. The measures are intended to reduce costs, improve the security of payments and facilitate the emergence of new and innovative mobile and internet payment methods.

Latest developments

On 5 May, the European Parliament and the Latvian Presidency of the Council reached a political agreement on the revision of the Payment Services Directive, or PSD2. This directive forms part of the 2013 payments package, along with the Regulation on Interchange Fees, which introduces caps for interchange fees applied to transactions based on ‘must-take’ consumer debit cards and credit cards, and provides for a series of business conduct rules.

The payments package came about as a response to an EU payment market that is seen as fragmented and expensive, with a cost of more than €130 billion a year – or 1% of EU GDP. At the time of the payments package adoption, the Commission stressed that the EU economy cannot afford these costs if it wants to be globally competitive.  

Benefits for consumers and businesses

Overall, the proposed PSD2 rules should mean more choice and better conditions for consumers and businesses. The new measures, which are the result of joint efforts by the Directorates-General for Competition and for Financial Stability, Financial Services and Capital Markets Union, should improve consumer protection against fraud, possible abuses and payment incidents, such as disputed transactions. Furthermore, they will ensure that all payment providers active in the EU are subject to the appropriate rules and supervision. In addition, the European Banking Authority (EBA) will be asked to prepare and develop security standards and maintain a list of registered payment institutions in Europe.

Jonathan Hill, EU Commissioner responsible for Financial Stability, Financial Services and Capital Markets Union, calls the agreement "an important step forward in making electronic payments for consumers safer, as well as encouraging competition and innovation".

The European Parliament will still need to vote on the directive and the rules have to be endorsed by the Council. Following adoption, which is expected later this year, Member States will have two years to transpose the directive into national law.

Read more on the Directive on Payment Services