Authors: Anna Mitsou

Title: The implications of PSD II for payments in the digital market

Abstract

The Payment Services Directive 2 (PSD II- Directive 2015/2366), which repeals PSD I and has already been transposed into Greek legislation by Law 4537/2018, aims to increase pan-european competition between banks and new entrants in the digital payments’ market and to increase consumer protection as well as to ensure transparency of costs and charges when consumers pay online.

Firstly, PSD2 obliges banks to grant access to payment accounts to two new types of Third-Party Providers (TPPs): Payment Initiation Service Providers (PISPs) and Account Information Service Providers (AISPs). PIPs facilitate online and mobile payments from customer’s bank account to the merchant’s bank account through a credit transfer, whereas AISPs collect and consolidate data on the different bank accounts of a consumer in a single place. Before the adoption of PSD II, entering the market of payments was complicated for TPPs, as these services were not regulated at an EU level and this created barriers to their expansion on a larger scale. With these barriers removed, more competition is expected with new players entering new markets and offering cheaper solutions for payments to more and more consumers throughout Europe.

In addition, PSD II diminishes charges paid by consumers when effecting electronic payments, since cross border payments in euro shall cost the same as domestic payments. In addition, the Directive enhances consumer protection in several ways, in particular, by requiring Strong Customer Authentication when effecting electronic payments and by reducing the payer’s liability for unauthorized transactions since the payer shall bear no liability in case no strong customer authentication has been applied. Payer shall be liable in case of unauthorized payments in case of payer’s fraud or gross negligence, which should be proven by supporting evidence.

This paper analyses the most important provisions of PSD II and their implications for the new digital market environment. It also points out some crucial issues which are left unaddressed by PSD II and may impede the perfection of a truly internal digital market.