DIRECTIVE (EU) ON PAYMENT AND ELECTRONIC MONEY SERVICES IN THE INTERNAL MARKET, AMENDING DIRECTIVE 98/26/EC AND REPEALING DIRECTIVES (EU) 2015/2366 AND 2009/110/EC

Introduction

• The draft third payment and e-money services directive (“PSD3“) is one of the elements of the package of acts, concerning the regulation of the market for payment services and access to financial data (open finance), published by the European Commission in June 2023. The Commission’s objective is, among other things, to revise the existing rules under Directive 2015/2366 on payment services in the internal market (“PSD2“) and to increase the level of secure payments in the EU.
• The draft PSD3 largely regulates issues that are currently governed by the provisions of Title II of PSD2 regarding payment service providers. These provisions set out the requirements for authorisation as a payment institution. The Draft PSD3 includes updates and clarifications to the provisions related to payment institutions, and includes existing electronic money institutions as a subcategory of payment institutions (and therefore provides for the repeal of Directive 2009/110 on the taking up, pursuit and prudential supervision of the business of electronic money institutions (“EMD2”)).
• PSD3 will therefore regulate:
  1. rules on the authorisation of payment institutions to provide payment and e-money services within the Union,
  2. powers and oversight tools for the supervision of payment institutions.

• The payments and open finance regulatory package announced by the Commission also includes a draft regulation on payment services in the internal market (“PSR“), which imposes new obligations on payment service providers, including to ensure better protection of payment service users (see: PSR), and a draft regulation on the framework for access to financial data (“FIDAR“), which aims to provide clear rights and obligations in the framework of the management of shared customer data in the financial sector.
• The draft PSD3 provides for the amendment of Directive 98/26 on settlement finality in payment and securities settlement systems and the repeal of PSD2 and EMD2.

Highlights of the PSD3

1. The provisions of the current PSD2 will be ‘split’ between PSR and PSD3. Most of the provisions governing the rights and obligations of payment service providers and users, respectively, in relation to the provision of payment services will be “transferred” to the PSR, while the provisions governing the requirements for authorisation as a payment institution and the supervisory powers and tools over such institutions will be “transferred” to PSD3.
2. Includes provisions providing for the need for “re-authorisation” proceedings for payment institutions and electronic money institutions that have been authorised under PSD2.
3. Increases the required amounts of initial capital for the provision of individual payment services so that:

• • if a payment institution only provides a money remittance service, its initial capital must at no time be less than EUR 25,000;
  • where a payment institution provides a payment initiation service, its initial capital shall at no time be less than EUR 50 000;
  • where a payment institution provides any of the payment services referred to in points 1 to 4 of Annex I of the Draft PSD3, its initial capital shall at no time be less than EUR 150,000;
  • if the payment institution provides electronic money services, its initial capital must not be less than EUR 400,000 at any time.

4. The draft PSD3 introduces additional requirements on the content of the application for authorisation as a payment institution. A novelty is the addition of a requirement to submit with the application a winding-up plan in the event of the payment institution’s insolvency.
5. A separate legal definition of distributors, i.e. persons distributing or redeeming electronic money, has been added, regulating the activities of such entities.
6. Provides that ATM operators providing cash withdrawal services that do not operate payment accounts and do not provide other payment services are not subject to authorisation, but will be subject to registration before commencing operations.
7. Provides for the development of Regulatory Technical Standards (RTS) on, inter alia:

• • application for authorisation,
  • assets protection requirements,
  • the operation and maintenance of a central electronic register.

8. Provides for the development of Implementing Technical Standards (ITS) on the details and structure of the information to be provided by national competent authorities, including data standards and formats for the EBA register.

PSD3 will enter into force 20 days after publication, with Member States adopting and publishing it no later than 18 months before the date of entry into force.