European Banking Authority has 'role to play' in setting PSD2 standards, says expert

Technology and payments regulation specialist Angus McFadyen of Pinsent Masons, the law firm behind Out-Law.com, said, though, that the EBA will be under pressure to complete its rule and standards-setting process in sufficient time to allow payment services providers (PSPs) to "adapt and comply".

McFadyen was commenting after EU law makers at the European Parliament and Council of Ministers reached political consensus on a new EU Payment Services Directive (PSD2). The European Commission first outlined plans for PSD2 in the summer of 2013 in a bid to develop a unified payment services sector that better fosters competition, innovation and security.

In the past few months, the Commission, Parliament and Council have been engaged in trilogue negotiations in a bid to iron out differences and settle on a single set of wording for the new Directive. The political consensus reached means that formal steps to finalise PSD2 and introduce the new legal framework for payment services in the EU can begin. The Directive will then be implemented into national law across the EU.

The reforms will bring a range of businesses that have entered into the payments market in recent years into scope of the new regulatory framework. It will also deliver a raft of new rules, including on access to payment accounts, liability allocation, transparency requirements and customer authentication measures.

"The European institutions have been grappling with some controversial issues through the trilogue and a great deal will sit in the detail that still needs to be hammered out – in particular, the EBA has a huge role to play in developing the rules and standards around third party providers, authentication and security measures,” McFadyen said. "These areas are in the headlights of existing payment service providers (PSP), particularly those with less agile, legacy processing systems, and those tech companies that are challenging the market."

"With the countdown to national implementation shortly to begin, there are already questions around whether the EBA can complete its task in time to enable PSPs to adapt and comply," McFadyen said.

The payments market in the EU will also be affected by other forthcoming reforms to EU law, including new anti-money laundering rules and restrictions placed on multilateral interchange fees, McFadyen said. "Industry driven changes", such as the rise of mobile payments, near-field communications technology and tokenisation, will also impact the market, he said.

MEPs and EU ministers have still to finalise some technical details of PSD2. Once that happens, the proposed new rules will be voted on by the European Parliament and the Council. Once the rules are adopted, EU countries will have two years to implement them into national law.