Commission Adopts New Regulatory Framework for Electronic Payment Services

On July 24, 2013, the European Commission announced the adoption of broad new legislative proposals to replace the 2007 Payment Services Directive (Directive 2007/64/EC) (the PSD), which include a new Payment Services Directive (PSD2) and proposals to regulate interchange fees for card-based payment transactions.

PSD2 introduces a number of important elements and improvements to the EU payment market. Security of low-cost Internet payment services will be increased by bringing new “payment initiation services”—services that operate between the merchant and the consumer’s bank—within the scope of the regime. Also, banks and all other payment service providers are required to tighten security for online transactions. The proposals envisage increased consumer protection against fraud and strengthen consumer rights when sending funds outside Europe or when paying in non-EU currencies. The proposed regime is intended to promote the entry of new operators and develop innovative mobile and internet payment systems in Europe.

The Commission has also proposed a draft Regulation (available here) to introduce maximum levels of interchange fees for transactions based on consumer debit and credit cards and ban surcharges on these types of cards. The proposals envisage that for an initial period of 22 months, caps would be imposed on international transactions before ultimately also being applied to domestic transactions. The Commission aims, in introducing these caps, to reduce costs for retailers and consumers and to create an EU-wide payments market.

The Commission’s proposed PSD2, scheduled for final approval by spring 2014, may be found here.