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The Payment Services Directive (PSD)

The Payment Services Directive (PSD): Practical Points

The Payment Services Directive 2 is now part of UK law with the implementation of the Payment Services Regulations 2017. The new rules update the original Payment Service Directive 2007, which was brought into UK law in 2009 through the Payment Services Regulations 2009. Here we provide details on the new rules and how you can make sure you are compliant with them. If you require any advice on the PSD and its impact on your business, please contact our fintech solicitors today.

What are the Payment Service Directives?

The Payment Service Directives are key pieces of EU Legislation designed to create the same rules with the same terms and conditions for electronic and non-cash payments across the EU. The original Directive was designed to develop a Single Euro Payments Area (SEPA) among other things, including increasing consumer choice and protection. The second Directive aims to modernise the current regime for the digital age, with features such as increased consumer protection and the removal of “surcharges”.

Payment Services Directive (PSD) 2007

The aim of the original EU Directive was to create a single market for payments all over the EU, with each country adhering to the same rules. The regime imposed an array of payment services underpinned by a system of safe cross-border payments, fast payments, consumer protection mechanisms, as well as clear information on all payment services.

The same set of rules were established across the European Economic Area (European Union, Iceland, Norway and Liechtenstein). Significantly, this EU legislation created an industry of Payment Service Providers to fuel competition and increase choice for customers. 

Payment Services Directive 2 (PSD2) 2017

In a nutshell, the new Directive takes into account digital payment services and recognises the potential for fraud, abuse and payment problems indicative of online and electronic payments. 

These rules affect all non-cash transactions such as:

  • credit cards;
  • online payments;
  • card payments; and
  • direct debits.

The Directive, which is now in force through the UK’s PSR 2017, also effectively abolishes the practice of retailers applying surcharges to consumers for using certain types of cards or payment services.

In addition, the Directive recognises that the fee structure applied to making electronic payments can fluctuate and be prohibitive, and the Directive aims to limit the charges which can be applied to consumers for the use of credit or debit cards.

With regards to competition, new payment services, as well as an increased diversity of Payment Services Providers, will not only increase competition but also widen consumer choice in the market.

With increased security comes increased supervision. This Directive has made sure that Payment Service Providers are subject to more stringent controls and accountability measures are in place.   

How does PSR 2017 affect Payment Service Providers in the UK? 

There is no question that one of the aims of PSD2 was to widen the scope of its reach, while significantly increasing consumer protection and provider accountability. 

The answer in short is that it affects everybody from banks, PSPs, fintechs and other organisations which were previously exempt due to limited network, digital download or commercial agent exemptions. Significantly, it also catches those businesses who provide or plan to provide account information or payment initiation services.     

The Directive, therefore, clearly has implications for businesses facilitating or initiating electronic transactions regardless of previous exclusions or status.

What is interesting is what lies in the way of opportunity for those businesses seeking to take advantage of the new payment services and types of provider created by the new regulations.    

In some cases, there may be more questions than answers. If you are unsure if PSR 2017 is relevant to your business, we recommend you contact our expert fintech lawyers to discuss your particular circumstances.   

What should you do now? 

There are broadly three types of business that will be affected by these changes:

  • current PSPs;
  • those businesses previously exempt from the original PSR 2009; and
  • those businesses seeking to provide ancillary services, i.e. account information or payment initiation services.

The PSRs are regulated by the Financial Conduct Authority (FCA) who will investigate, take action or prosecute where necessary those businesses failing to comply with the regulations. The new PSRs do not introduce any differences in the possible penalties available to the FCA for non-compliance.

There are various rules under the new PSRs to which all such businesses will require to adhere, including:

  • conduct of business rules;
  • data protection;
  • customer consent; and
  • information security rules.

If you are a Payment Service Provider and therefore already adhering to the original PSRs, we advise that you review your current practices from security to compliance and introduce any changes necessary under the new regulations.  

For those businesses previously exempt due to limited network, digital download or commercial agent exemptions, you will require to undertake a stringent audit of your services to identify whether you are now caught by the regulations.

For those businesses seeking to provide ancillary services, you will also be in the position of having to review your practices and compliance strategies under the new regime.

How can Selachii help?

At Selachii, we do things a little differently. We will assist you with every aspect of your PSR compliance, whether you require to update your current practices, find out whether you are caught in the new regime or seek to enter the market.

We are specialists in what we do, and that specialism has been born out of our tenacious and entrepreneurial approach.   

We offer the same level of experience and expertise as you would expect to find at a large city law firm, with state-of-the-art case management technology. We take the time to get to know our clients and treat them as individuals.

We work with both businesses and private individuals, giving you legal advice and support that is totally bespoke to your situation. We do not believe in simply handing out one-size-fits-all solutions to problems. We will dissect your situation so that we understand every element before designing the best and most cost-effective way of getting you to the outcome you want.

Contact our Payment Services Directive (PSD) Solicitors London, Today

Contact a fintech lawyer at Selachii today for expert legal advice on payment services in the UK and Europe. Call us on the number below or complete our contact form to arrange a consultation. 

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