The changes for the payment and e-money industry set forth by the impending PSD3 and PSR.

1. Draft PSD3
and PSR
Evolution or
Revolution ?
Joan Carette
Partner
Philippe De Prez
Partner
FinTech Belgium Webinar
29 September 2023

2. Timeline
2009
EMD2
(2009/110)
2015
PSD2
(2015/2366)
2020
EU
Commission
Retail
Payment
Strategy
(RPS)
July
2022
EBA Review
of PSD2
Q2
2024
Agreed text
on the level
of the EU
Council
Q3-Q4
2024
Agreed text
on the level
of the EU
Parliament
(Trilogues
EU Council /
Parliament /
Commission)
Q4 2024
Vote in the
EU
Parliament /
Publication
final text
2026
Entry into
force PSR
and local
implementat
ion PSD3
Beyond
2026
Several
EBA RTS /
Guidelines
From the drafts over a
final version to the
entry into force
From EMD2/PSD2
to PSD3/PSR
June
2023
Draft PSD3
&
PSR
TODA
Y
Draft PSD3/PSR – Evolution or Revolution 2

3. 4 objectives of the PSD3/PSR proposal
Strengthen user
protection and
confidence in
payments
Through improvements to SCA,
combating payment fraud,
improve access to cash and
better user rights & information
Draft PSD3/PSR – Evolution or Revolution 3
Improve the
competitiveness of
open banking
services
Through improvements of
data interfaces and a new
open banking permissions
dashboard
Improve
enforcement and
implementation in
Member States
Though directly applicable
conduct rules, reinforce NCA’s
enforcement powers and by
merging payment and e-money
regimes
Improve
access to payment
systems and bank
accounts for
non-bank PSPs

4. Regulatory framework structure
PSD2 / 2EMD
transposed into national law
PSD3
authorisation process & prudential
regime
(to be transposed into national law
18m after entry into force)
PSR
PSP and user conduct rules
(directly applicable on the PSD3
transposition deadline day)
Draft PSD3/PSR – Evolution or Revolution 4

5. Payment & E-money Services
Payment Services in PSD2 Payment Services in PSD3 proposal
Annex I
1) Services enabling cash to be placed on a payment account
1) Services enabling cash to be placed on and/or withdrawn from a
payment account
2) Services enabling cash withdrawals from a payment account
3) Execution of payment transactions
2) Execution of payment transactions, including where the funds are
covered by a credit line
4) Execution of payment transactions where the funds are covered by a
credit line
5) Issuing of payment instruments and/or
acquiring of payment transactions
3) Issuing of payment instruments
4) Acquiring of payment transactions
6) Money remittance 5) Money remittance
7) Payment initiation services 6) Payment initiation services
8) Account information services 7) Account information services
E-Money Services in 2EMD Annex II
Issuance of electronic money
Issuance of electronic money, maintenance of payment accounts storing e-
money units and transfer of e-money units
Draft PSD3/PSR – Evolution or Revolution 5

6. Exemptions & Exclusions
Draft PSD3/PSR – Evolution or Revolution 6
Access to cash exemptions
under the PSD3
• Retailer cash withdrawals
• PSD2 already contained an exclusion for
purchase with cashback;
• PSD3 now adds an exclusion for cashback
without any prior purchase
• Cash withdrawal with ATM deployers
• Services enabling cash withdrawals offered by
ATM deployers not servicing payment accounts
are exempt from the licensing requirements…
• but will be subject to a new (lighter) registration
process.
Exclusion list remains
largely unchanged
• Commercial agent exclusion:
• Different interpretations gave rise to legal
uncertainty in the past
• Clarifications introduced to narrow the scope
(ref to self-employed commercial agents + “a
real margin to negotiate OR conclude”)
• Limited network exclusion (LNE):
• Online store environments should not be
covered by the notion “premises of the user” //
EBA GL

7. EMIs go, e-money stays
Draft PSD3/PSR – Evolution or Revolution 7
• Payment and e-money regimes merge into one harmonized framework
• PIs and EMIs already have very similar rules, in particular regarding the conduct of business
rules.
• The aim of the merging is to create a single, coherent legal framework for both establishments
and their services
• Certain licensing requirements (initial capital, own funds) and key concepts on e-money
services (issuance/distribution and redeemability) are distinct from payment services and these
specificities are preserved in the proposal
• EMIs disappear but e-money services can now be offered by PIs
• Article 2 (4) of the PSD3 proposal: “’payment institution’means a legal person that has been
granted authorisation (…) to provide payment services or electronic money services throughout
the Union”.

8. Quid existing PIs & EMIs?
• Re-authorisation is required for
existing PIs and EMIs
• This is fully similar to the PSD1/PSD2
transition period back in 2018
• 'compliance with Title II'
• The validity of existing licenses will
be “grandfathered” until 30 months
after the entry into force of PSD3
• under the condition that the re-application
is made within 24 months of the entry into
force of the PSD3
Draft PSD3/PSR – Evolution or Revolution 8

9. Key changes under PSD3 (1)
Draft PSD3/PSR – Evolution or Revolution 9
• Authorisation process & standards
• Authorisation remains at national level but is expected to become more stringent
• EBA Level 2 Guidelines expected to avoid different expectations across Member States
• Focus on standardising rules and avoid arbitrage as well as forum shopping:
• PIs requesting authorization should a least provide part (= less than the majority) of its services in
that Member State.
• When applying for a license, an overview of jurisdictions should be provided of where the PI is
submitting or is planning to submit a license application (article 3 (r) PSD3)
• a new requirement for a winding-up plan as part of the license application (article 3(s) draft
PSD3)
• Better alignment with DORA when it comes to the security control and mitigation measures and
GDPR when it comes to information sharing

10. Key changes under PSD3 (2)
Draft PSD3/PSR – Evolution or Revolution 10
• Capital Requirements
• Indexation of certain amounts as a result
of the inflation
• Own funds requirements
• Same methods as before but with method
B as default method
• Specific method D remains for PIs issuing
e-money
• AISPs & PISPs can now hold 50k own
funds instead of holding a professional
indemnity insurance
• Safeguarding requirements
• Avoid concentration risk: PIs cannot use
the same safeguarding method / bank
account for all customer funds
• Possible alternative to safeguard funds at
a central bank (at the discretion of such
bank)
• New definitions and clarifications
• Triangular passporting / BNPL / payment
accounts / technical service provider / e-
money distributor / NFC & Digital pass-
through wallets

11. Key changes in PSR (1)
• Access to payment systems
• As direct participants (vs situation today
where non-bank PSPs are required to rely
on banks for direct access)
• (Reinforced) access to payment
accounts
• unless serious grounds for refusal such
as AML, breach of contract, insufficient
information provided, excessive risk profile,
disproportionate high compliance cost (how
will this work in practice?)
• An appeal right will be available
• EBA RTS will follow to harmonise rules on
(the motivation of) refusals
Draft PSD3/PSR – Evolution or Revolution 11

12. Key changes in PSR (2)
Draft PSD3/PSR – Evolution or Revolution 12
• Open Banking
• No drastic changes but lessons learned
from PSD2, including
• Some standardization (standards
communication ISO/CEN)
• a dedicated interface open to AISPs and
PISPS should be put in place by ASPSPs
• No more fall-back system required, but
using the bank's client interface remains
possible in very specific cases
• dedicated user dashboard where data
permissions can be withdrawn/re-granted
• Enforcement Powers
• Enforcement (sanctions and
administrative measures) are much more
detailed compared to PSD2 to strengthen
and harmonise enforcement
• specific provisions on non-compliance
with open banking provisions
• Introduction of (topped) periodic penalties
until a breach is resolved
• EBA product intervention powers – (ex
ante) prohibit/restrict services which are
harmful to customers or the market

13. Key changes in PSR (3)
Draft PSD3/PSR – Evolution or Revolution 13
• Customer protection measures on
transparency
• Transparency obligation towards users in relation to
the moment when funds will be received by the PSP
of the payee located outside the EU (one-leg-out
transactions)
• Transparency obligation on estimated currency
conversion charges of international transactions
• Anti-fraud measures
• specific liability regime for third party pretending being
a bank employee (spoofing)
• Obligation for the payee PSP and payer PSP to check
the consistency between the name of the payee as
provided by the payer and the IBAN
• SCA
• Implement and build on the RTS on SCA and EBA
Opinions & Q&As
• Improve the accessibility of SCA to also include non-
digital clients and disabled users
• New liability regime for technical service providers
(apply / Google Pay) and payment scheme operators
failing to comply with SCA
• Two elements out of three – not necessarily belonging
to two different categories
• AIS: one SCA done at first use – then by theAISPSP
every180 days

14. What’s next? The role of the EBA
• Guidelines
• Authorisation process
• internal governance arrangements
• Exclusion from the scope
• Payment Fraud Risk Programmes
• Regulatory Technical Standards
(RTS)
• Safeguarding
• Own fund calculation exemptions
• Dedicated interfaces
• Transaction monitoring mechanism
Draft PSD3/PSR – Evolution or Revolution 14

15. Word of reflection
• Will this really lead to more
harmonization?
• Will it lead to more harmonisation when a lot
of options can still be picked by the Member
States ?
• Is a Regulation the right instrument:
provisions on liability but matter of national
civil law
• Is PSD3/PSR a revolution? Impact
existing institutions?
• Financial Data Access Regulation
• No revolution but potentially important
operational/technical impact
Draft PSD3/PSR – Evolution or Revolution 15

16. Thank you for
your attention!
Follow us on Linked-In