On June 23, the European Banking Authority (EBA) released an Opinion setting out its proposals for the review of the Second Payment Service Directive (PSD2) by the European Commission. The Opinion is the EBA’s response to the European Commission’s (EC) call for advice published 20 October 2021 pertaining to the review of PSD2.

Summary of the EBA’s proposals to the Commission:

• Clarification of the scope and key definitions in PSD2. This encompasses the nature of each specific payment service and the clarification of key terms and definitions, such as ‘payment account’, ‘payment instrument’, ‘electronic payment transaction’, ‘initiation of a payment transaction’, ‘remote payment transaction’, ‘sensitive payment data’.

• Licensing of payment institutions and supervision of payment service providers under PSD2 that include the review of the prudential framework.

• Proposals on rights and obligations to address issues related to the blocking of funds including to not introduce maximum limits for the amounts to be blocked on the payer’s payment account when the exact transaction amount is not known in advance but to introduce a range of requirements for such blocking of funds, including for the PSP to have a justified reason

• Strong customer authentication, notably regarding the regulatory treatment of merchant-initiated transactions and transactions excluded from the scope of SCA and the mitigation of social engineering fraud risks

• Access to and use of payment accounts data in relation to PIS and AIS, including the possibility of having a common application programming interface (API) standard across the EU (to be developed by the industry)

• Access to payment systems and access to accounts maintained with a credit institution with the proposal to introduce criteria for refusing access to or terminating existing accounts

The Opinion will be of interest to payment service providers and other firms operating in the EU payments sector.

This EBA opinion does not constitute a formal proposal but will likely be considered by the Commission in its ongoing review of PSD2, read our article here for further information.