2 PSD2- C HALLENGES AND OPPORTUNITIES Pascale-Marie BRIEN– Senior Policy Adviser

2 Payment Services Directive 2 and level 2 measures  PSD2 (adopted 8th October 2015) updates PSD1 and must be implemented in National law by January 2018  Opens access to payment accounts to Third Parties  For payments and information services  Level 2 measures to be proposed by the European Banking Authority (EBA)

1.Traditional online payments: no disclosure of credentials 5. Funds 1.Purchase 2.Choice of online bank e-payment when checking out 3. Payment Instruction Details 4. Credentials and Payment Instruction Directly to consumer’s online bank portal 3

2. Pass-Through services: no disclosure of credentials 5. Funds 3. Payment Instruction Details 1.Purchase 2.Choice of Pass-through TPP when checking out 4. Credentials 4

2. Pass-Through services: Disclosure of credentials 5. Funds 3. Payment Instruction Details 1.Purchase 2.Choice of Pass-through TPP when checking out 4. Credentials 5

6 PSD2 and level 2 measures  The Regulatory framework (PSD2) has substantial contradictions and poses serious legal challenges  Level 2 measures (Regulatory standards) cannot solve these issues but could make sure damages are limited and security is maintained

7 Contradictions within PSD2  Strong customer authentication but TPPs can have access to security credentials  Whereas the customer must keep his/her credentials safe and not transmit them to third parties  How can a customer distinguish a “good” TPP from a fraudster on the internet ?

8 Legal challenges introduced by PSD2 (ctd)  Banks must reimburse in all circumstances “first port of call” (Article 73)  No contract between Banks and TPPs  Consent of the customer to use the services of a TPP.  Complex provisions = clarifications in the industry’s interpretative guidelines of PSD2 (summer 2016)

9 From a challenge to an opportunity EBF proposals  Open communication standards between ASPSPs and TPPs defined collectively  Openess  Transparency  Security  With clear objectives for payment providers  Interoperability at EU level  Practical implementation (API,...) should be left to market

10 EBF proposed solutions (2)  Governance structure to ensure all participants receive the level of service they expect  Developing and maintaining standards  Define and monitor the rights and responsibilities of all stakeholders  Manage PSPs’ certification and trust marks  Offer dispute resolution mechanisms  Several governance entities  Both at Domestic and European level

11 EBF proposed solutions (3)  Strong customer authentication and exemptions  We agree with EBA  Flexibility required to manage risk  Security and integrity of sensitive data (credentials and payment data)  Direct transmission of credentials from the client to the issuer of the credentials (ASPSP) – Token exchanged between TPP and ASPSP  End-to-end encryption  Managed access to payment account data by AISP

12 EBF proposed solutions (4)  Secure communication between ASPSPs and TPPs  Legally binding European register  Mutual authentication through electronic seals based on certificates  To allow real type check of status  May be based on the provisions of the eIDAS Regulation  Secure identification of TPPs by the public  Trust marks issued by a certification body (preferably European)  Trust marks withdrawn if certification is withdrawn

13 PSD2 goes far beyond payments PSD2 is the CATALYST of the digital revolution Opening access to payment accounts Risk for banks to be disintermediated on…..almost everything they do today Solution ? Re-engineer the banks approach to business through A customer centric approach on account services to capitalise on the trust banks inspire

14 For more information Pascale-Marie BRIEN Senior Policy Adviser European Banking Federation Avenue des Arts 56, B-1000 Brussels European Transparency Register ID number: (0) | Cover image: European Space Agency