PSD2: Getting Ready for the Next Generation of Payment Services (Part 1)

The European Commission's long awaited revision of the Payment Services Directive (PSD2) will bring a range of new players inside the regulatory regime.

The Commission's assessment of the 2007 Payment Services Directive (PSD) was that it was generally fit for purpose but needed to be updated to reflect the dynamic nature of the payments services market. At the same time, the Commission highlighted inconsistencies in the way in which Member States had implemented PSD and the consequential fragmentation of the payments services market along national borders, especially in internet and mobile payments. In order to address these challenges, it has changed the scope of the PSD and expanded the type of services for which organisations will require to be authorised or registered as payment services institutions.

PSD will be repealed and replaced by PSD2. Among the more important changes in the e-commerce and m-payments space are:

E-commerce platforms will no longer be able to rely on the "commercial agent" exemption to escape regulation where they act for both the buyer and seller in a payment transaction. The Commission perceived a risk to consumers using such platforms without the legal protections of PSD, so this exemption is being tightened and a commercial agent will, if the e-commerce platform wishes to rely on the exemption, only be able to act for one party or another but not both. The "digital services" exemption, which some had expected to be removed, has been retained, but with tighter controls on its scope. The aim is to cover ancillary payment services carried out by the providers of electronic communication networks or services, such as mobile network operators, connected with the sale of digital content to their subscribers. The new rules will set limits on the levels of mobile payments (50 per transaction and200 per month) for the exemption to apply but the type of device used will be irrelevant. These changes will cause some businesses currently relying on the digital services exemption to review whether they will need to be authorised or registered as a payment services institution. The "limited network" exemption has been redrawn, with a view to bringing large scale or high volume payments or wide ranges of products and services into the regulated arena. The intention of the Commission is to clarify the scope of the exemption and to focus on payment instruments which are used to purchase goods or services in a specific store or...