The takeaway: The European Parliament and Council have agreed on a set of significant changes to how online payments and payment services must operate. The new measures aim to strengthen user protection against both fraud and hidden fees associated with online transactions – and that's only the beginning.
European authorities have completed the negotiation phase for the Payment Services Regulation and the Third Payment Services Directive, two new regulatory frameworks designed to improve user protection and transparency in online payments. The rules aim to harmonize and modernize how payment service providers operate across the European Union, covering payment services offered by banks, post-office giro systems, and other financial institutions.
The primary focus of the new regulations is stronger consumer protection against online fraud, the European Parliament said. If a PSP fails to implement "appropriate" anti-fraud mechanisms, it will be required to reimburse customers for any resulting financial losses. PSPs will also be obligated to perform additional checks on a payee's identity and refuse payments when inconsistencies or risks are detected.
Suspicious transactions must be blocked as well, according to the Parliament. A PSP may also be required to refund the full amount lost by a customer if the customer reports the fraud both to law enforcement and to the PSP. In line with provisions of the Digital Services Act, large online platforms could also face consequences from PSPs if they fail to remove fraudulent content hosted on their services.
European authorities are additionally seeking to improve pricing transparency, requiring PSPs to disclose all fees before a transaction begins. Information that should soon be more clearly communicated includes currency-conversion rates for international payments and fixed fees for ATM cash withdrawals.
Speaking of cash, Europe also wants to ensure that customers have better access to payment methods in rural or underserved areas. People should soon have the option to withdraw small sums – €100 to €150 – at retail stores, with no requirement to purchase anything in order to get the money.
Could these new rules create additional bureaucratic burdens for PSPs and online banks? The EU's elected body believes they will not. The agreement with the European Council is designed to reduce market barriers for "open banking services," such as account information providers and payment initiation services.
Banks and other financial institutions will no longer be allowed to "discriminate" against these services, improving access to payment data. Payment authorization procedures will also be simplified, the Parliament said. If a consumer chooses to pursue an "alternative" dispute resolution process, PSPs will be required to comply.
René Repasi, a German MEP who worked on the PSR, said that "consumers will benefit from new, harmonized rules on payment services regulation. Mandatory fraud-prevention measures will be applied and lead to less payment fraud. Banks have to share more of the burden if they fail to do their part."
Danish MEP Morten Løkkegaard remarked that the PSD3 directive will make the European digital market more resilient and open. Previous rules governing online payments had become outdated and required substantial updates.
Now that negotiations over the PSR and PSD3 are complete, the European Parliament and Council – Europe's main legislative bodies – will have to formally adopt the new rules before they can come into full effect.