New Policy for Cross-border Payments in Europe: An Overview of PSD3's Impact
EU's PSD3 Set to Revolutionize Cross-Border Payments and Open Banking
The European Union is gearing up for a significant shake-up in its payment landscape with the introduction of the third Payment Services Directive (PSD3). This new amendment to the EU's payment regulations aims to make cross-border payments easier and more secure, and foster innovation in the open banking sector.
PSD3, which was introduced in a new legislative proposal by the European Commission on 28 June 2023, is part of a wider movement towards making payments easier on the continent. The directive builds on the foundation laid by PSD2, introduced in 2007, with updates to consumer protections, fraud prevention, and the inclusion of new payment technologies.
One of the key impacts of PSD3 on cross-border payments is improved efficiency and transparency. The directive introduces standardized rules aimed at reducing settlement times and lowering costs for cross-border EU transactions, making international commerce smoother for businesses and consumers.
PSD3 also addresses regulatory divergence present under PSD2, ensuring a more consistent legal framework across member states. This harmonization will lead to more seamless, efficient, and secure cross-border payments between EU member states.
In terms of open banking, PSD3 extends and deepens PSD2’s principles. The directive aims to widen the inclusion of third-party providers, such as fintechs and electronic money institutions, giving them improved access to payment systems and customer bank accounts. This boosts competition and innovation opportunities in the open banking sector.
PSD3 also strengthens dispute resolution and liability frameworks tied to open banking services, addressing gaps seen under PSD2 and increasing customer confidence. Furthermore, PSD3 brings blockchain-based payments, digital wallets, cryptocurrency, and Buy Now, Pay Later (BNPL) services under clear regulatory and security standards, supporting seamless integration into open banking ecosystems.
PSD3 also supports incoming regulations on instant payments, a trend towards these systems worldwide. Examples of such systems include UPI in India, Pix in Brazil, and FedNow in the US.
Cross-border payments companies are taking steps to prepare for PSD3, but the specifics of their preparations are not detailed in this report. However, it's clear that PSD3 is set to level the playing field between banks and non-banks by creating a more competitive and innovative payments market.
This report provides context around the current state of the cross-border payments market in Europe. For a more extensive range of research and analysis, a free account is required.
In conclusion, PSD3 is set to foster a more secure, competitive, and integrated EU payment market, promoting open banking adoption and facilitating efficient cross-border payments by removing barriers and reinforcing trust among service providers and customers throughout Europe.
- The improvements in efficiency and transparency brought about by PSD3 will not only make international commerce smoother for businesses and consumers, but also create opportunities for innovation in the realm of finance and technology.
- With the extension and deepening of open banking principles in PSD3, there will be increased access for fintechs and electronic money institutions to payment systems and customer bank accounts, fostering competition and innovation in the technology sector.
