Implementation of the Revised Payment Services Directive (PSD2)

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On the 19th of September, the Financial Conduct Authority (FCA) published Policy Statement PS17/19: Implementation of the revised Payment Services Directive (PSD2) which included the updated Approach Document and final Handbook changes.

PSD2 sets out the requirements and standards for firms operating in the payment services sector. Banks, building societies, and payment institution are all impacted by this regulatory development which sets out to improve consumer protection, increase the safety and security of payments, and reduce the cost of payments services across the single market.

By the 13th of January 2018 the UK must implement most of the requirements under PSD2. Her Majesty’s Treasury has already published and is subsequently implementing the Payment Services Regulations 2017 to give the bulk of PSD2 effect in domestic law. Resultantly, the FCA policy statement’s primary focus is the mechanisms by which the FCA will apply the regulations, a process that has been informed by the execution of two consultations – CP17/11 and CP17/22.

With the Policy Statement, the FCA have published the updated Payment Services and Electronic Money: Approach Document which replaces and consolidates the former Payments Services and E-Money Approach Documents. This document is intended to assist firms in understanding their regulatory obligations under the new regulations and how the FCA will approach relevant issues.

Some of the critical things to know about the Policy Statement include:

  • New services such as account aggregation services that aim to assist consumers manage their finances by brining all their bank account data into one location now come under the purview of the FCA as well as services that allow consumers to pay online without the use of a credit or debit card.
  • It introduces several new requirements around how firms treat their customers and handle complaints.
  • Currently authorised payments services firms and e-money issuers will be required to reapply for authorisation and the FCA has already written to those firms setting out the deadline by which firms must be re-authorised.