PSD3 – European Parliament’s draft amendment

After the European Commission submitted a legislative proposal (“Commission Proposal“) to the Parliament and the Council in summer 2023 to revise Directive (EU) 2015/2366 (Payment Services Directive 2 – “PSD2“), the Parliament adopted the proposal with amendments on 23 April 2024. The Commission Proposal provides for PSD2 to be amended and split into two legal acts – a directive and a regulation. Provisions regarding the authorisation and supervision of payment institutions are now to be regulated in a directive (“PSD3“) and provisions regarding supervision and the civil law obligations of payment services are to be regulated separately in a regulation (“PSR“).

In doing so, the legislator aims to harmonise European regulations, as regulations are directly applicable to the Member States and do not require transposition into national law. At the same time, Directive 2009/110/EC (Second E-Money Directive) will be repealed and e-money institutions will be included in the scope of the Commission Proposal.

In this part, we summarise the most important innovations from the Parliament’s draft amendment to PSD3 (hereinafter “Draft Amendment” or “PSD3-D“). In a second part, we will report on the changes introduced by the PSR.

What is new in the Draft Amendment?

• Acceleration

The Draft Amendment contains numerous provisions which, in particular, shorten some of the deadlines provided for in the Commission Proposal and are therefore intended to help speed up the procedure. For example, the final decision on the granting or refusal of authorisation to provide payment services is to be taken within two months (instead of three months as in the Commission Proposal) from the submission of the complete documentation (Art. 14 PSD3-D).

The Draft Amendment provides for a further reduction of the deadline from two months to one month for the notification of the supervisory authorities to the payment institution regarding the entry of agents in the register to be kept (Art. 19 para. 2 PSD3-D).

The Draft Amendment also provides for various shorter deadlines of ten to 15 business days instead of one month for the forwarding of the necessary information by the supervisory authority of the home Member State to the supervisory authority of the host Member State in order to utilise the so-called European passport (Art. 30 para. 2 PSD3-D).

• Easing of authorisation requirements

Payment institutions (including e-money institutions) that have obtained a licence to provide payment services no later than 18 months after the PSD3 comes into force must prove to the supervisory authority that they meet its requirements no later than 24 months after it comes into force.

While, according to the Commission proposal, the supervisory authority should prohibit the provision of payment services in the event of non-compliance with this deadline until full proof of the requirements has been provided, the draft amendment only provides for a suspension of the authorisation in this case, without explicitly prohibiting the provision of payment services (Art. 44 para. 1, Art. 45 para. 2 PSD3-D).

Contrary to the original Commission proposal, the draft amendment no longer provides for an increase in the initial capital for payment institutions operating the e-money business (Art. 5 PSD3-D). It remains at the previous level of EUR 350,000.

• Exceptions

For cash provision services by retailers, the Draft Amendment provides for an increase in the cash limit from EUR 50 to EUR 100 (Art. 37 para. 1 PSD3-D). The prerequisite for the provision of this service is that the customer authenticates the transaction and the retailer ensures that the transaction is not anonymised.

The Draft Amendment provides for an additional exemption from the authorisation procedure under PSD3-D for providers of payment services or e-money services (exclusively account information and payment initiation services) for payment transactions using e-money tokens within the meaning of Regulation (EU) 2023/1114 (the EU Regulation on Markets In Crypto-Assets – “MiCAR“), provided that the payment service provider has already been authorised as a provider of crypto-asset services in accordance with the provisions of MiCAR (Art. 34 para. 1 PSD3-D). This is intended to avoid double supervision. However, the implementation of this regulation is optional for Member States.

• Deadline for loan repayment

Under the provisions of PSD3-D, payment institutions may grant loans under certain conditions (Art. 10 para- 4 PSD3-D). However, the Draft Amendment deletes the 12-month period for repaying such loans and places the determination of such a “reasonably short period” in the hands of the competent authorities.

Assessment and outlook

The shortening of deadlines to speed up procedures is also to be welcomed in principle, although the practical effects are likely to remain manageable.

By and large, the Draft Amendment retains the essential content of the Commission’s proposal. With regard to the transitional provisions provided for in the Draft Amendment, it is to be welcomed from a practical perspective that the authorisation of already authorised institutions should only be suspended if the deadline for compliance with the requirements of PSD3-D is exceeded, but not necessarily linked to a prohibition of payment services.

The increase in the maximum amount for cash provision services to EUR 100 is also to be welcomed. In view of the steady decline in the number of existing ATMs, a further increase may make sense from the customer’s perspective.

It is unclear whether the prescribed authentication means strong customer authentication. The possibility of determining the length of the maximum credit period on a national basis appears critical in view of the harmonisation objective of PSD3-D, particularly for institutions that make use of the so-called European passport. It is also unclear who the “competent authority” should be for determining the time limit in Art. 10 para. 4 PSD3-D.

Next steps in the legislative process

The European Parliament adopted the European Commission’s proposals for the PSD3-D (and the PSR) at first reading on 23 April 2024 with amendments. Next, the Council may either decide to approve the Parliament’s position – in which case the PSD3-D will be deemed adopted – or amend it – in which case the Commission Proposal will be referred back to the Parliament for a second reading.

In view of the extensive amendments by the Parliament and the European elections in June 2024, we expect that the negotiations between the European Parliament and the Council of the European Union will only begin after that.