The new Payment Services Directive (PSD2), scheduled to enter into force on January 13, 2018, will change the established business models in the payment market. This is due to new types of payment services and new rules which oblige banks to assist third party providers (TPP) in accessing their accounts and initiating payment transactions. Much depends on how PSD2 will be transposed into national legislation, a process which should be completed by January 13, 2018.
PSD2 expands the definition of payment services by adding payment initiation services (PIS) and account information services (AIS) to the catalogue.
PIS are services in which their provider initiates a payment order at the request of the payment service user (the payer) from the payer’s account at another financial institution. The PIS provider is, in fact, a facilitator that enables the transmission of funds from the payer’s account to the payee, without the need for the payer to communicate directly with its account-holding institution (in most cases, a bank).
AIS services are intended to provide consolidated information on one or more payment accounts held by the service user in other financial institutions. An AIS provider will enable the user to receive aggregated information from payment accounts held by one or more financial institutions in a single place.
The provision of TPP services does not depend upon the existence of a contractual relationship between the TPP and the account-holding institution. Every credit institution which operates payment accounts will be obliged to have an open interface (API) in place to enable third party providers to communicate with it in order to gain access to its data or to initiate payment transactions. Under PSD2, on the one hand, institutions operating payment accounts are obliged to treat the TPP on an objective, non-discriminatory, and proportionate basis. On the other hand, banks must apply the highest measures to make their interfaces secure in order to protect the interests and data of their clients. In some countries, like Poland, banks are organizing to create a common Open API standard for national banking systems. Such projects are considered positive and beneficiary for both sides because of their universal nature, lower costs of development, and integration (e.g., the third-party provider need adapt only to a single banking interface). Banks are also eager to benefit from the Polish Open API project, which, for example, allows them to charge an additional premium free for the provision of certain information to an AIS provider which is not mandatory under PSD2.
Under Article 32 of PSD2, Member States retain the right to introduce lower regulatory requirements for companies intending to start providing services in the payments industry. Restrictions include a rule that such companies need carry on the payment service business only in their home Member State and that the average turnover in payment transactions cannot exceed the limit set by the Member State (which cannot be higher than EUR 3 million per month). In accordance with the draft Polish PSD2 implementation act, the Polish legislator has decided to use this national option to introduce the concept of a “Small Payment Institution” in the domestic legal system. This form of conducting business in Poland requires notification to the Polish Financial Supervision Authority (although no authorization from the PFSA is required), requires that the average monthly payment transactions not exceed EUR 1.5 million, and provides that a maximum of EUR 2,000 may be stored on the user’s payment account. Such entities may provide all kinds of payment services, but not PIS and AIS, which seem to be a good option for start-ups to verify whether their business model idea has the potential to become successful.
Given the above, it seems that the new regulations will create comfortable conditions and a productive environment for the financial technology community in the EU. This, in turn, should foster the development of innovative Fintech businesses. For banks, PSD2 brings substantial challenges but, as can be observed, banks are also trying not to fall behind and take advantage of the fast-changing market environment. We hope this race will ultimately benefit payment service users.
[The Traple Konarski Podrecki & Partners law firm is participating in the public consultation process related to the eventual implementation of PSD2 in Poland.]
By Jan Byrski, Partner, and Karol Juraszczyk, Legal Advisor, Traple Konarski Podrecki & Partners
This Article was originally published in Issue 4.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
