Payment Services Directive 2 (PSD2)

The Payment Services Directive 2 (PSD2) is a directive issued by the European Union (EU) to regulate payment services within the EU and the European Economic Area (EEA). It aims to increase competition, transparency, and security in the payment industry while also promoting innovation and consumer protection.

PSD2 introduces several key provisions. One of the most significant is the requirement for banks and other payment service providers to open their payment infrastructure to third-party providers through Application Programming Interfaces (APIs). This enables new players, known as Third Party Providers (TPPs), to access customer account information and initiate payments with the customers’ consent. Additionally, PSD2 mandates Strong Customer Authentication (SCA), a more secure way for customers to validate their identity when making payments electronically. Furthermore, the directive establishes a framework for regulating and supervising payment institutions and mandates specific rules for payment service providers to comply with.

Overall, PSD2 aims to foster innovation in the payment industry, enhance customer security and control over their financial data, and improve the efficiency and competitiveness of the European payments market.