New EU Commission proposals for updated rules on payment services

The European Commission presented two proposals for updated rules on payment services, in a bid to combat fraud, increase transparency for consumers, improve the availability of cash, and level the playing field between banks and fintechs. The proposals were put forward on 28 June 2023 with the aim to reinforce consumer protection – including by improving fraud prevention – and make sure that consumers are offered the best and cheapest payment service. The package includes a directive establishing rules on the licensing and supervision of payment institutions and a regulation with rights and duties for payment service providers, which updates the previous payment directive (PSD2).

According to the Commission, the revision to improve the regulation was needed as payments have substantially changed since the directive was adopted in 2015. In particular, electronic payments in the EU have been growing, reaching a €240 trillion value in 2021. New providers, enabled by digital technologies, have entered the market, in particular providing ‘open banking' services, i.e. securely sharing financial data between banks and financial technology firms (‘fintechs'). More sophisticated types of fraud have also emerged, putting consumers at risk and affecting trust.

In response to these developments, the package for instance introduces new provisions for redress of frauds, which were already provided in case of unauthorised transactions. With the updated rules, banks will have to reimburse customers also for authorised payments in bank impersonation cases. On top of this, the Commission’s proposal introduces obligations for telecom operators to cooperate with payment service providers in a bid to avoid fraudulent activities and scams. At the same time, payment service providers will be able to exchange fraud-related information without breaking GDPR rules. With this payment service providers will gain a legal basis allowing them to voluntarily share data on payment fraud. As a result of the above, a sound liability framework for fraud cases will be vital for both customers and banks.

The rules are also expected to enhance transparency for customers, by giving the customers the possibility to check whether the name of the payee and bank account number match. Apart from this the revised rules the proposal also introduces more transparency regarding charges for ATM withdrawals and both charges and timelines for payments directed outside the EU. Finally, the package speeds up the pay-out of unused funds which are temporarily blocked for payment, such as in the case of hotel reservations, while also ensuring the blocked amount is proportionate to the amount expected to be paid.

The EU Commission on 28 June 2023 has also proposed regulations that should reinforce the use of euro cash as well as introduce a digital euro. According to the proposal on the legal tender of the euro cash, Member States will need to ensure widespread acceptance of cash payments, as well as sufficient and effective access to cash, giving retailers the possibility to offer cash provision services to customers also in the case in which they do not purchase anything. This service would remain voluntary and depend on the retailer’s cash availability. At the same time, merchants providing this service should disclose possible fees for customers.

On the other hand, the legislative proposal also aims to establish the legal framework for a possible digital euro as a complement to euro banknotes and coins. It would ensure that people and businesses have an additional choice that allows them to pay digitally with a widely accepted, cheap, secure and resilient form of public money in the euro area (complementing the private solutions that exist today). While the proposal – once adopted by the European Parliament and Council – would establish the legal framework for the digital euro, it will ultimately be for the European Central Bank to decide if and when to issue the digital euro.

The proposal will now need to be negotiated by member states and the European Parliament and will apply 18 months after entering into force.