March 25, 2024

DSP3, PRS, instant transfer - Deciphering the main texts that will shape tomorrow's payments

The world of payments is changing! On June 28, 2023, the European Commission tabled a dozen texts aimed at building a more secure, efficient and innovation-friendly payments landscape.

Open Banking, fraud, instant transfers... there are many issues to be addressed. To help you understand what's at stake, here's a summary of the main texts currently under discussion in the European Parliament.

Contents

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PSD3: a Directive to confirm the framework for collaboration

PSD3 focuses on PSP approvals. In particular, it merges the status of Electronic Money Institution and Payment Institution in favor of the latter.

PSD3 is a directive: it is not directly applicable in member states. It must be transposed into national law in the 28 countries of the European Union. It is therefore accompanied by a regulation that can be applied unchanged in each member country, to ensure faster, uniform implementation.

PSR: a regulation that defines the operational contours of PSD3

Harmonization of banking APIs

The PSR (Payment Services Regulation) details the functionalities that must be included in banks' mandatory APIs. These APIs are essential to the smooth operation ofOpen Banking and its deployment. At present, each bank can select the standard options it chooses to apply, creating a certain degree of complexity, with operations sometimes differing from one bank or country to another. Although not all the complexities have yet been resolved, PSR is moving towards a more reliable, harmonized system.

Reinforced security standards

The PSR requires banks and payment institutions to check IBANs at onboarding (to ensure consistency between the name in the KBIS and the name of the holder in the bank). Fintecture already performs these checks before making its services available to merchants.

Sharing information to combat fraud

The various players will be able to exchange information to strengthen the fight against fraud.

Adjustments to strong authentication

The PSR confirms a change to PSD2 dating from the summer of 2023. For account access services (AIS), a single authentication (SCA - Strong Customer Authentication) will be required every 6 months (instead of every 3 previously). For payment initiation services (PIS), authentication will continue to be systematically required every time and for the first euro.

Instant transfer regulations

Following the Council's agreement at the end of 2023, this regulation was adopted by the European Parliament on February 26, 2024. Its aim is to make instant transfer mandatory throughout the European Union.

A major change is on the horizon: the rates for instant transfers (SCT Inst) cannot be higher than those for standard transfers (SCT SEPA). This rule will apply to both private and corporate customers. In France, for private customers, instant transfers should therefore be free of charge.

The commission's objective is to switch volumes from conventional SCT to SCT INST in order to :

- Enable beneficiaries (merchants, suppliers, employees, etc.) to access funds more quickly

- Use SCT INST for payment clearing (cards, wallet, etc.)

- Promote new alternative payment methods through instant transfers, with competitive rates.

Next steps

The text was published in the Official Journal of the European Union on March 13, 2024. It came into force 20 days later in all EU countries (including France). This is followed by a period of application which differs according to the articles of the Regulation :

January 9, 2025

All banks must be able to receive instant transfers in euros
The price of an instant transfer (SCT Inst) must not exceed that of an ordinary transfer (SCT). In France 🇫🇷, it will be free of charge for private customers!

October 9, 2025

All banks to be able to issue instant euro transfers
Banks and payment institutions such as Fintecture will need to ensure that the IBAN matches the name of the beneficiary of a transfer.

The Open Finance Regulation (IFAD )

This regulation concerns the entire financial sector, not just payment accounts (credit, savings, etc.). It will enable PSPs to access information on savings accounts and all types of credit (consumer, mortgage, leasing, etc.), with the holder's consent, of course. This will enable PSPs to offer new services, such as checking the creditworthiness of a counterparty.

The euro digital regulation

This regulation aims to create a digital euro, a new ECB currency to be distributed by banks. Companies (and even individuals) could hold a digital currency account on the books of the ECB, via a PSP.

A Directive on the purpose of payments

This directive puts an end to the banking monopoly on access to payment infrastructures. PSPs will be able to access infrastructures (STET credit transfer, ABE Clearing) without going through the banks. This new feature will enable payment institutions to process payments themselves or to go through another payment institution.

The opening up of this market should give payment institutions access to more suitable offers, at more competitive rates.

" The number of texts under discussion at European level, combined with a very tight discussion and voting schedule - prior to the European Parliament elections - testifies to a strong political will and an unprecedented consensus. The question is no longer one of substance, but of how we can work together to build a stronger, more independent Europe of payments, while ensuring that innovations are rapidly adopted on a massive scale..

Fanny RodriguezGeneral Secretary and Director of Operations, Fintecture

Conclusion

Fintecture welcomes these new European regulations, which are conducive to the development of value-added services based on Open Banking. From merchants already offer payment initiation services through our Immediate Transfer or BNPL BtoB. The harmonization of APIs and the development of instant transfers are strong measures that will make transfers much more attractive.

With smoother, more secure payments adapted to every type of use, the "new generation" credit transfer will gradually take its place in the payment habits of individuals and businesses.