Elevating the payments experience, for you and your customers

JP MORGAN EXPLORES MASTER

With over 126 billion non-cash transactions happening annually in the EU area and growing every year, the third Payment Services Directive, or PSD3, has the opportunity to make payments easier, faster, and more secure. Well, keeping up with a fast-changing regulatory landscape isn't always easy. So what do you actually need to know about PSd3, and why does it matter to the future of payments?

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PSD3 is a draft of an EU regulation that builds upon PSD2, which shook up the payments world. PSD2 was created to protect consumers, like you and I, and encourage more competition between banks so that we get a fairer deal. It introduced open banking to the EU and established strong consumer protection standards by requiring stricter security measures for online protocols, such as strong customer authentication.

PSD3 is a positive evolution that does what PSD2 didn't do. It looks to future-proof payments regulation. So what are the impacts of PSD3? Remember, this is still just a draft and will likely change over the next 18 months. But even in the early stages, there are some standout benefits of PSD3.

Firstly, improved transparency and accessibility. PSD3 improves accessibility by offering additional means of strong customer authentication, or SCA. This includes methods that do not require a smartphone. Secondly, it creates a level playing field. EMIs are now included within PSD3 definitions and are considered a subcategory of a payment institution. This eliminates risk of regulatory arbitrage, creating a fair and equal playing field.

Thirdly, strengthen customer protection. PSD3 introduced account verification requirements for the payee's payment service provider, or PSP. It also added liability clarifications for various fraud scenarios and reinforced the need for robust transaction monitoring mechanisms. This gives customers increased protection around their banking payments.

Next up, cross-border payments. PSD3 encourages cross-border payments with reduce fees, improved exchange rates, and simplified payments processes, making it easier for consumers and businesses to move money around the world. And finally, innovation and competition. To improve innovation and fair competition, PSD3 will give users better control over their data. Improved innovation and competition means better payments experiences for EU consumers longer term without sacrificing security.

PSD3 likely won't be enforced until 2026, but early compliance can open opportunities for new partnerships, build loyalty through improved security practices, and enable new ways for your customers to pay. You can get ahead of the curve in three steps. Firstly, assess your current processes and systems to make sure you're adhering to PSD2 and make any necessary updates.

Next, enhance security measures, including two-factor authentication, if you haven't done so yet. And finally, stay informed of changes to the directive, which will come as a draft is refined and updated. We all know it's impossible to predict the future. At JPMorgan Payments, we help you understand the fast-changing payments landscape so you can focus on what's most important to your business.