At the time of writing, three full years have elapsed since the Payment Services Directive (PSD) was due to be fully transposed in all EU member states and in the three other countries that comprise the European Economic Area (EEA). All member states have now implemented the provisions of the PSD in their national legislation, albeit with some delay.
Explicitly mentioned in Article 87 of the PSD is a review of its implementation and impact, which had a target completion date of 1 November 2012. A study was tendered in August 2011 to complete this activity, alongside Regulation 924/2009.
Unfortunately the results of this review, as well as the official European Commission (EC) standpoint, are not yet available. This article will nevertheless explore the implementation and impact of the PSD at a high level. It will first look at the transposition and then review the three main objectives of the PSD and consider whether success is already evident in the market. The transposition of the PSD was an important milestone towards making the single euro payments area (SEPA) a reality as well, and in theory the two should aid payments harmonisation across Europe.
When looking at the transposition of the PSD, three elements come into play:
- The transposition date.
- The implementation of various provisions in national legislation.
- Application of the so-called member state options.
With regards to the transposition date, the official date mentioned in the PSD was 1 November 2009. However a number of member states transposed the PSD later than this; most of them in the first half of 2010, but in the case of Poland not until 2011. This indicates that the realisation timelines of the PSD objectives have been shorter than the three year target.
As regards implementation of the various provisions in national legislations, the EC executed a study published on its website. In this study a country-by-country and article-by-article analysis was carried out on the transposition. The main conclusion discernible from the report is that member states have implemented the PSD properly. However, not each and every provision was fully implemented.
Furthermore, some member states have included additional requirements, which has meant that the goal of full harmonisation has not been fully achieved. Since the PSD is a directive, and not a regulation, this is not surprising.
In addition, the PSD contains member state options – in other words member states can decide the implementation of certain provisions. One of the most noteworthy is the way that micro enterprises should be handled by payment service providers (PSPs); that is as consumers or non-consumers.
Some member states, including the UK, made the decision to have micro enterprises treated as consumers. This had a considerable impact on PSPs since the definition of a micro enterprise does not align with the definition of various customer segments within the bank. This led to re-segmentation efforts by banks. Overall, these member state options do not make for a fully-harmonised market.
Objectives of the PSD
The PSD includes the following objectives:
- Increased competition, through the introduction of a new PSP license called the payment institution (mainly covered in Title II).
- Increased consumer protection and better comparability of payment services via increased transparency of conditions and information of payment services, combined with specific rules related to the use of payment services (mainly covered in Title III and partly in Title IV).
- The creation of a level playing field relating to rights and obligations on the provision and use of payment services (mainly covered in Title IV).
The PSD introduced the structure of a new licence scheme for PSPs, called payment institutions (PIs). Through this, the EC aims to increase competition by lowering the threshold of various requirements that must be met to obtain a licence to offer payment services. A credit institution licence or electronic money (e-money) institution licence is not needed, as a PI licence is sufficient provided the criteria to become a PI are met.
The main question is whether PIs have shaken up the payments market yet? For the time being, the answer is ‘no’. Most registers of PIs can be viewed easily and they show that multiple PIs have registered in the various European Economic Area (EEA) countries, but as yet the majority are well known-brands offering, for example, money transfer services or card services. Although there are new companies as well, it is too early to determine whether they pose a real threat to the established PSPs. There has not been any flood of new entrants.
Transparency requirements have mainly been implemented by PSPs through the adaption of general or product terms and conditions. Many PSPs grasped the opportunity of the PSD to completely rewrite their (consumer) terms and conditions, revising them and making them easier to understand. However, there is no readily-available evidence that this has increased competition by enabling a better comparison of services or improved consumer protection. Again, there has been relatively little time for these elements to materialise so far.
Rights and obligations on the provision and use of payment services
The key effects of the PSD are found in Title IV. For instance, transposition of the directive led to changes such as the abolition of value dating, which worked to the disadvantage of the payment service user, and a refund period for direct debits of eight weeks throughout Europe. All in all, the introduction of the PSD led to a partial harmonisation of payment product characteristics throughout Europe.
The PSD has played an important role in straightening the path to the implementation of SEPA that will now be enforced through the end-date regulation, which stipulates a compliance deadline of 1 February 2014 for eurozone members and October 2016 for those countries not part of the single currency. The transposition of the PSD was an important milestone towards making SEPA a reality.
However, current market developments also show that the PSD and the end-date regulation combined do not lead to immediate harmonisation across Europe. Local market differences still exist and will continue to do so even after migration to SEPA, at least for some time yet. This could even lead to mini-SEPAs, because of individual countries’ specific additional optional services and flavours.
Based on a macro view of Europe and the implementation of the PSD, one might conclude that time has been too short to easily determine the results of increased competition. The PSD has, nonetheless, played an important role in the route to SEPA’s launch in providing a legal framework underpinning the scheme.
We await the results of the study into the implementation and impact of the PSD and whether a more in-depth analysis will yield other conclusions, or possibly even lead to a PSD II.
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