October 2016

Payment Services Directive 2 (PSD2), applicable from 13th January 2018, introduces changes and additions to the initial Directive, which laid the legal foundations for a single, EU-wide payments market. This paper is intended to be a comprehensive guide to how PSD2 will affect your operations – from the processing of transactions (due to PSD2’s scope extension), to customer authentication requirements, to changes stemming from licensing third party providers to offer payments services.

PSD2 contains a number of key alterations to the preceding Directive, including extending its application both geographically – to payments where only one payment service provider is located in the EU/EEA – and beyond euro payments to all currencies. It introduces strict security requirements for the initiation and processing of electronic payments, mandating 2-factor authentication. And finally, it licenses third party providers to offer specific, payment-related services, and obliges financial institutions to give them access to customer account information via a virtual interface. 

Each of these changes has implications for both financial institutions and corporates accessing payment services. In this paper, we offer an overview of the Directive and a summary of its most important provisions, highlighting how each of them will directly impact your organisation.

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