Eurozone: The new European framework for Payment Services

Executive Summary

• On 24 July 20 13, the European Commission presented a Payment Services Directive proposal (PSD2) which updates the current Directive (PSD1) , in force since 2007 . It also provides new regulation on interchange fees.
  
• One of the most important issues of this review is that the relevant authorities establish the same registry, licensing and supervisory rules for new players in the electronic payments market , the so - called Third Part y Payment Service Providers (TPP).
  
• Payment Services Providers providing accounts (banks and other payment bodies) may not discriminate against TPPs, but must give them access to client accounts and/or the capacity to handle transfers, once the client concerned has given consent.
  
• The EBA, in close cooperation with the ECB, is in charge of providing guidelines and operating guides on issues relating to technical mechanisms to guarantee interoperability between all the stakeholders in a trustworthy ecosystem.
  
• The regulations set caps on interchange fees: 0.2 % in the case of payment with a debit card and 0.3% for credit cards. The text provided by the Parliament provides for the replacement of the 0.2% cap on debit cards with 7 eurocents.
  
• Issuing banks’ revenues per transaction will fall as a result of the cap on interchange fees and they will be obliged to find ways to offset this, such as higher inter est rates for credit, or higher annual commissions.
  
• Although the European Parliament has already approved amendments to the draft of both regulations, the Council must adopt its own position and negotiations between Commission, Parliament and Council must take place before the final approval, which is expected to be postponed until 2015 because of European elections.
  
• The PSD2 reform is another step forward in the process of eliminating regulatory asymmetries between the new thriving technological players and traditional retail banking . The new players have a large market share in the provision of digital services but they have not been subject to the same restrictions as the regulated institutions. However, PSD2 will not kick in for a few years , allowing the competitive disadvantage to continue