The Payment Services Directive 2 (PSD2) is a regulation of the European Union that aims to promote innovation, competition, and security in the payment services industry. It was introduced to update and replace the original Payment Services Directive (PSD) that came into effect in 2007. PSD2 was enacted in 2018 and has since had a significant impact on the financial services industry in Europe.
PSD2 introduces several new requirements for financial services providers. These requirements include the following:
- Strong Customer Authentication (SCA): PSD2 requires that payment service providers implement SCA for all electronic transactions. SCA is a method of verifying a customer's identity using at least two different forms of authentication, such as a password and a fingerprint.
- Open Banking: PSD2 requires banks to share their customer data with third-party payment service providers through secure application programming interfaces (APIs). This enables third-party providers to offer payment services to customers, as well as access account information and initiate payments on behalf of customers.
- Prohibition of Surcharge Fees: PSD2 prohibits merchants from imposing surcharge fees on customers who use certain payment methods, such as credit or debit cards.
- Transparency and Competition: PSD2 aims to increase transparency and competition in the payment services industry. This includes requiring payment service providers to disclose their fees and transaction costs to customers, as well as providing customers with the ability to compare services and switch providers easily.
In conclusion, PSD2 is a European Union regulation that aims to promote innovation, competition, and security in the payment services industry. It introduces new requirements for strong customer authentication, open banking, and transparency in the industry. PSD2 impacts payments services providers, and has had a significant impact on the industry since its enactment in 2018.