Payment Services Directive
January 2018 marked the deadline for EU Member States to implement the revised Payment Services Directive (PSD2) into national law. Though not an EU member, Jersey has also recently adopted amendments to its own domestic legislation, ensuring it remains consistent with PSD2.
The first Payment Services Directive (PSD1) was introduced in 2007. Aimed at harmonising consumer protection and the rights and obligations for payment providers and users, it paved the way for the creation of the Single Euro Payments Area (SEPA), the culmination of efforts to increase efficiency and lower costs associated with cross-border payment processing within the EU / EEA.
Befitting their role as significant European financial centres, Britain’s Crown Dependencies (Jersey, Guernsey and the Isle of Man) joined SEPA in May 2016.
PSD1 was followed in 2016 by PSD2. This second EU Directive aims to further catalyse competition and innovation in the payments industry. Expanding the reach of the EU legislation, extending it to new types of payment services, PSD2 aspires to create a digital single market within Europe.
A key change is the bringing into scope of transactions in which one of the payment service providers is outside SEPA. Another change brings access to bank account data (with the consent of the account holder) for two new types of Third Party Providers: Account Information Service Providers (AISPs) and Payment Initiation Service Providers (PISPs). This has been heralded as ending the banks’ monopoly on their customers’ account information and payment services.
PISPs will be able to initiate payments on the customer’s behalf. Access for AISPs will allow them to present a banking customer with analysis of all that person’s accounts enabling them, for example, to inform the customer’s spending behaviour and consolidate account information from different banks into a single report.
Commentary | Payment Services Directive
The potential security implications of allowing third party access to bank customers’ account data are clear, hence PSD2 introduces enhanced customer protections and new security requirements for electronic payments and account access. It will be interesting to see how, in practice, PSD2 interacts with that other far-reaching piece of EU legislation due in 2018, the General Data Protection Regulation (GDPR).
With an established finance and regulatory sector, and having been quick to develop advanced digital infrastructure and promote digital innovations (one of the first jurisdictions to adopt a regulatory regime for virtual currency), Jersey’s growing ranks in the fintech / regtech space could be well placed to exploit the greater opportunities for industry disrupters which it is anticipated PSD2 will bring.
If you require any further information, advice or assistance please contact Mason Birbeck at email@example.com
Main Contact | David Hill
Head | Cross Border & International Transactions, Corporate/M&A
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