European Union Council Passes PSD2

European Union Council passed the Payments Service Directive 2 (PSD2) on November 16, 2015. The directive incorporates and repeals directive 2007/64/EC, which provided the legal basis for the creation of an EU-wide single market for payment services. The regulation was adopted at a meeting of the Agriculture and Fisheries Council, and the member states will have two years to transpose the directive into their national laws and regulations.

The revised Union legal framework on payment services is complemented by Regulation (EU) 2015/751 of the European Parliament and of the Council. The regulation introduces, in particular, rules on the charging of interchange fees for card-based transactions and aims to further accelerate the achievement of an effective integrated market for card-based payments.

Directive 2007/64/EC was adopted in December 2007 on the basis of a commission proposal in December 2005. Since then, the retail payments market has experienced significant technical innovation with rapid growth in the number of electronic and mobile payments and the emergence of new types of payment services in the marketplace, which challenges the current framework.

The revised directive adapts the rules to cater for emerging and innovative payment services, including Internet and mobile payments. It sets out to ensure a more secure environment for payments, in particular for those using remote channels.

Since the adoption of the original Payment Services Directive in 2007, methods for the initiation of payments in the field of e-commerce have evolved. They usually form a software "bridge" between the website of the merchant and the online banking platform of the payer's bank in order to initiate Internet payments on the basis of a credit transfer. These services are now covered by the directive. They enable the payment initiation service provider (who never holds the user's funds) to give an assurance to the payee that the funds necessary for a specific payment transaction are available on the customer's account and that the payment has been initiated.

A regulatory regime to cover the activities of account information services is also established. These services provide the payment service user, for example, with aggregated online information on payment accounts held with other payment service providers. This enables the payment service user to have an overview of his/her financial situation at any given moment, within a secure environment.

At the same time, the directive promotes stronger security measures for Internet payments and for the use of services provided by new market players. It will ensure strong customer authentication to identify the client for each transaction. The new and strengthened supervisory regime will further increase the security level and consumer protection in this field.