Payment services regulation 2024: definition, goal, and timeline

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PSD2 felt like a bombshell piece of legislation when it first came in, with high hopes of open banking transformation. And while the regulation has been successful in some areas, inefficiencies like high fraud rates have also been identified, leading to the introduction of the PSR. The EU’s recent report listed “unharmonized implementation”, “cross-border difficulties” and “disproportionate requirements and costs” as barriers under PSD2. In this article, learn all about PSR and how it will fix those challenges.

Trustpair goes further than European regulation in terms of fraud prevention, by providing ongoing account validation. Contact an expert to learn more!

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What is the PSR?

The Payment Services Regulation (PSR) is a part of the wider PSD3 regulation for banks and third parties offering financial services in the European Union. It primarily aims to improve customer rights, increase protections against fraudulent transactions, and harmonize financial services across the EU.

PSR legislation has been proposed to level the playing field between banks and non-banks. Since third parties are being granted access to the sensitive financial information of their customers, the EU created the PSR to register and certify these businesses, as well as set standards for operating. This ensures they are contracted to protect customer information to the same level that banks and registered financial institutions do.

The Payment Services Regulation therefore applies to banks, and two other types of organizations:

  1. Payment initiation service providers (PISPs): this enables customers to pay companies directly from their bank account, without the need for a card
  2. Account information service providers (AISPs): show all of a customer’s financial account information in one place

The parts of the regulatory procedure that were deemed ‘unclear’ will be directly replaced with legislation in the PSR. Banks will need to improve accessibility to their services and verifications for vulnerable groups, such as disabled or elderly customers. Finally, the e-money directive will be introduced to both PSD3 and PSR.

Some examples of the types of services covered by the PSD3 and PSR include:

  • Displaying account information from various bank accounts to compare financial products and providers
  • Getting data insights to support budgeting
  • Making direct debit payments through a subscription app Sending global remittances to family members abroad
  • Enabling customers to pay for online items directly from their bank, without needing a card

What is the difference between the PSR & the PSD3?

PSD3 and PSR are both EU and UK regulations which go hand-in-hand to update the previous regulation, PSD2. They were both proposed in 2023 and while this isn’t a complete overview, here’s a quick summary of both legislations.

PSR

Cash provision services under the PSR reflect the wider call for more cash availability within the EU, even as digital payments have also increased. This, alongside the instant payments directive, puts greater pressure on accessible finance.

In order for banks to improve access to financial services, PSR will require them to provide transparent and proportionate rules that don’t discriminate against groups of customers. That being said, the usual risk assessments and KYC rules will continue to apply.

PSR focuses on the banks’ obligations in terms of access to financial services, with a particular focus on upgrading PSD2’s fraud prevention mechanisms. Transaction monitoring is an important part of the PSR, as well as data sharing between providers.

Technologies like Trustpair’s payment security solution may become more important from a regulatory perspective, as it’s unclear whether the regulation will properly address fraud issues.

But with the ability to detect suspicious behavior, through signs like duplicate payments or abnormal amounts, Trustpair automatically blocks outgoing payments to suspicious accounts. ‘Knowing your Customer’ isn’t enough – secure risk through the entire supply chain with Trustpair.

PSD3

PSD3 looks at the barriers in place preventing cross-border transactions and payment systems from working more successfully. Its changes will bring about the evolution of the EU payments market as a whole, by allowing non-bank payment service providers to access all systems.

Of course, with this privilege comes great responsibility, with the legislation considering appropriate safeguarding and improved anti-fraud protections.

The PSD3 expands on PSD2’s previous open banking regulations, especially in granting customers access to their own data dashboards. This shows the customer which permissions they’ve granted, and lets the consumer remove or delete permissions. While PSD3 amendments need to be mandated into national laws across the EU, PSR applies directly across member states. 

PSR

PSD3

Focused on what banks have to do to 

Focused on what PISPs and AISPs have to do

Provide more fair, transparent and  accessible financial services from banks

Provide data dashboards to customers to give them more control over who collects and stores their information

Updating SCA, customer verification and identification

Minimum standards for open banking APIs to secure data

No need for national implementation, it applies directly across EU member states

Requires national implementation into each EU local country laws

What is the PSR calendar?

The timeline for PSR implementation is not fully known, but we can bring you up to speed on the history of the regulation.

  • Sep 2019: PSD2 introduced
  • Sep 2021: PSD2 review call for opinions
  • Oct 2022: Instant payments proposal
  • Feb 2023: Study on the impact of PSD2 released
  • Jun 2023: E-money services proposal
  • Late 2024: PSR and PSD3 likely to be implemented 2026: PSR likely to apply

A recap of the Payment Services Regulation

The Payment Services Regulation (PSR) is an incoming EU regulation in financial services. Its goal is to improve open banking and further level the playing field for third-party payment and accounts providers (non-banks). By upgrading security and identification measures, PSR aims to reduce fraud, and Trustpair’s account validation platform can help.

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FAQ
Frequently asked questions
Browse through our different sections and find the answer to your question.

SEPA stands for the Single Euro Payments Area, and in 2024, the EU’s Instant Payments Directive will apply to this jurisdiction. The 2024 SEPA regulation will require payment service providers offering SEPA credit transfers to do so within 10 seconds. This regulation hopes to increase the competitiveness of EU payments and attract new financial players.

The timeline for PSD3 and PSR implementation is 18 months after it will be announced. Since it’s expected to come into effect in late 2024, regulated companies should ensure that they are complying by mid-2026.