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European regulation

Regulatory shock in the land of payments

How Europe is moving ahead with legislation that will revolutionize our payment habits.

In recent years, financial services, and payments in particular, have undergone profound changes in the regulatory environment in Europe, to the benefit of new uses.

Deciphered by Fanny Rodriguez, General Secretary and Director of Operations at Fintecture

The origins of Open Banking

The second European Payment Services Directive (PSD2) of 2018 is the first building block of Open Banking. It provided a regulatory framework for the activities of fintechs, which were thus able to access customer banking data as part of a payment process, requiring a high level of transaction security. Strong authentication rules have been created, and banks have encouraged merchants to apply them in order to secure their customers' shopping experience. 

PSD2 has thus given rise to two distinct services, activated on the basis of user consent: 

  • l'Account Information Service (AIS)a process that gives access to payers' banking information, such as transaction history, to ensure, for example, their creditworthiness for credit scoring purposes.
  • Payment Initiation Services (PIS), enabling an individual or company to order a payment transaction and automate an account-to-account payment, without an intermediary.

4 new "game changer" texts

Instant credit transfers will become compulsory with the implementation of a European regulation. All European banks will now be obliged to offer this payment method to their business and private customers, at the same price as a conventional bank transfer. The instant transfer allows funds to be transferred in 10 seconds, compared with 24 hours (or more!) previously with a conventional bank transfer... and that's its great strength! Merchants receive the funds instantly and can dispatch their goods, improving both customer service and cash flow. There's no doubt that the instant transfer will undoubtedly energize the world of payments, and de facto, the business of Fintechs, inclined to seize the latest innovations. Although instant transfers are making progress year on year, there are still many applications to be explored before they become an integral part of everyday life for individuals and businesses alike. 

In addition, Payment Service Providers (PSPs) will soon benefit from PSD3 and PSR (Payment Services Regulation). This new European regulation will clarify the liability regime between fintechs, banks and their customers, to the benefit of all. It's a safe bet that this precise framework of responsibilities will boost the performance of existing APIs under PSD2, as banks will be required to communicate information even more fluidly to regulated players such as fintechs.

Finally, a scheme (European contract) and two other key texts are currently being prepared. The first, to be introduced by the European Payments Council in 2023, concerns premium APIs, which will be fee-based functionalities added to existing APIs resulting from PSD2. They could enable other types of service (for example, the current SIP enables immediate or deferred credit transfers, but does not allow an amount to be pre-booked on an account, like a bank card imprint system). The others concernOpen Finance, which would extend access to payers' financial data to financial data not necessarily linked to payment accounts (savings accounts, for example). The aim is to offer solutions that are even more adapted to the market, and to improve the fight against fraud. Here again, significant progress could be made: PSPs will be able to collect customer data very quickly and automatically, with the customer's consent, and thus become key players in the credit market, able to respond almost instantaneously to financing needs. Furthermore, the regulation on the digital euro will enable the European Central Bank to create a new currency, which could be directly accessible to payment institutions.

The challenge of European sovereignty in the background

These regulatory changes in Europe are designed to promote competition between banks and fintechs to the benefit of users, with a diversification of payment solutions, whether instant, deferred or on credit... Against this backdrop, there is a strong political will to boost innovation via a European infrastructure and players. In a tense geopolitical context, it's a safe bet that this trend will only continue.

Fanny Rodriguez

Fintecture is an ACPR-regulated payment institution. In addition to licenses 7 and 8 (PIS payment initiation and AIS account information services), we have obtained licenses 3.a, 3.c and 5 for the execution of payment transactions and the acquisition of payment orders.

We aim to reinvent the credit transfer payment experience by leveraging the opportunities offered by technology, including those offered by open banking. As such, we have been heavily involved for several years in the regulatory developments shaping the world of payments, alongside fintechs, banks and French/European regulators. Fintecture holds several strategic mandates in bodies at the heart of discussions on the future of payment in Europe, such as AFEPAME (Association Française des Établissements de Paiements et de Monnaie Électronique), CNMP (Comité National des Moyens de Paiements) and ETPPA (European Third Party Providers Association), to name but a few! 

Regulatory shock in the country of payment

In this white paper, Fintecture deciphers the main European texts and innovations that will change the payments landscape.

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