by Andrea Gnetti and Chiara Resmini, respectively CEO and Associate Manager in Excellence Payments
Open Banking, Security and Innovation with the New Payments Package
2025 promises to be an important year for digital payments in Europe. With the introduction of the New Payments Package, a series of legislative proposals and strategic initiatives that aim to improve the experience of consumers and businesses in the payments sector, the European path of greater consumer protection and progressive market opening continues. In addition to the technical aspects of the legislation, it is important to analyse some fundamental questions: will these innovations be able to respond to the real needs of consumers and businesses? What are the impacts for market operators?
The New Payments Package, published by the European Commission in 2023, includes PSD3, a directive with updates to PSD2 (the directive that paved the way for open banking and introduced Strong Customer Authentication), new rules on sharing financial data with FIDA, and a complementary regulation (PSR) aimed at harmonizing the application of the provisions among Member States.
This package of regulations adds to other important initiatives in the sector, such as the Instant Payments Regulation, applied from 9 January 2025, which obliges PSPs to offer instant credit transfers by equating their fees to those of ordinary credit transfers and the Digital Euro project expected in the coming years, which will represent a further challenge for payment service providers.
The publication of the New Payments Package, expected within the first half of the year, will require PSPs to start the adaptation activities already this year, specifically to PSD3 and the PSR, the result of a review of the PSD2 currently in force.
The new Directive and the Regulation aim to address four issues that emerged as priorities from the analysis of the current state of market regulation: improving security against fraud to strengthen trust in payment systems, strengthening open banking, harmonising rules between Member States and ensuring fair competition between banking and non-banking players.
The most relevant issues in the New Payments Package for the offer and use of payment instruments are addressed in the PSR. In this regulation we find provisions aimed at strengthening trust in the payment system with regulations in the field of fraud management and transparency, as well as additions to the previous Directive on open banking and guarantees of fair competition between banking and non-banking players. The approach identified by the Commission to include in the regulatory package a Regulation directly applicable in all Member States to complement the Directive (focused on authorisation and supervision provisions) instead ensures harmony at the level of regulation of the sector in the internal market.
Security and Trust in Digital Payments: What’s New in PSD3 and PSR
Consumer trust is the cornerstone of any successful business model. PSD2 has made important steps in this direction by reducing the number of frauds with the introduction of SCA (Strong Customer Authentication), but the evolution of technology, the growing sophistication of frauds and the growth in all Member States of the adoption of digital payment systems have led the regulator to intervene to ensure the continuity of consumer protection and the maintenance of consumer trust. The PSR promises to further strengthen security, for example by requiring the verification of the correspondence between the beneficiary name and IBAN (Check IBAN) before confirming a transaction even in ordinary bank transfers and by improving the mechanisms for monitoring transactions and sharing frauds between operators in the sector.
The Regulation also introduces specifications relating to transparency obligations with a view to increasing consumer awareness at the time of the transaction and the management of disputes: the Parliament with the amendments to the Commission text reinforces this point by expressly speaking of “transparent and easily understandable communication”. In particular, the Regulator insists on transparency provisions in 3 macro-areas: currency transactions, withdrawal transactions and dispute management with communications that make the knowledge of the commissions applied by PSPs, including their composition, and the methods for making any complaints more accessible to the end user.
To encourage the adoption of digital payment solutions for the most vulnerable consumers who frequently use cash, the text of the PSR proposed by the Commission, strengthened by the amendments of the Parliament, proposes: provisions on the methods of communication to consumers that must be “clear and understandable”, commitments in education on the recognition of fraud for its prevention and the obligation to review the SCA processes to ensure their accessibility also with means other than smartphones.
The evidence of the latest ECB study on the payment behavior of European consumers confirms, in fact, that cash payments remain the most frequently used means at points of sale, even if in continuous decline (52% in 2024 vs 79% in 2016) in favor of a constant growth of digital tools. The importance of having cash payment options remains high for European consumers, even growing from 2022 (31% of consumers who consider it important to have the option to pay in cash vs 27% in 2022 – latest survey). Furthermore, while payment cards are now consolidated as the preferred payment instrument among all targets, regardless of age group or education level, among the elements that could persuade consumers to try “new payment solutions” the most cited motivation is “higher levels of security” (37%) with a greater weight than “ease of use” (34%) and “affordability” (29%).
Open Banking: Are PSD3 and PSR Removing Barriers?
Open banking was one of the most ambitious goals of PSD2, and now with PSD3 and, above all, PSR the aim is to strengthen this transformation. The idea is to create an ecosystem in which data and services circulate freely between banks and third parties (AISPs and PISPs), offering users smoother and more personalized experiences.
However, the results of the years following the entry into force of PSD2 reveal that, although the adoption of open banking solutions has grown (+1.7% in 2024), we are still far from full potential. Industry players report among the main problems: technological barriers, a limited offer, high investment costs, regulatory gaps, poor quality banking APIs and unsatisfactory customer experience.
The analysis of the new regulation reveals that the Regulator’s intent is precisely to work on the main problems reported by market operators: the new rules promise to eliminate technical obstacles, obliging system operators to provide standard and accessible interfaces to third parties to facilitate innovation and ensure fair competition.
From this point of view, cooperation and the proposal of accessible, transparent solutions that can offer value-added services to the final consumer will be the key to a concrete step forward towards the open banking system and, more generally, the open finance system desired by the European Union. This system is also supported by the proposal of the new framework for the access and secure use of financial data contained in the regulation called “Financial Data Access” (FIDA).
New Payments Package: when does it come into force?
Currently, the regulations included in the New Payments Package are awaiting the opinion of the European Council, after having been approved with amendments at first reading by the European Parliament in April 2024.
The latest forecasts indicate that the definitive documents will come into force by the first half of 2025, however the applicability of the provisions will be effective between the end of 2026 and the beginning of 2027.
It is important for system operators to start, as soon as the new regulations are issued, the analyses to understand how to adapt to the new provisions not only from a regulatory point of view, but also by analyzing risks and opportunities in the development of their business.
