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Overview

PSD3 and Open Finance Forum

Shaping the Future of Payments & Open Banking: From PSD2 to PSD3, PSR, and Beyond

The European financial landscape is entering a transformative phase. While PSD3 and the Payment Services Regulation (PSR) introduce significant regulatory updates, Open Banking remains the cornerstone of innovation, competition, and financial inclusion across Europe.

Open Banking: Still Central to Europe’s Digital Finance Strategy

Open Banking, first introduced through PSD2, continues to play a vital role in shaping the financial ecosystem. It enables secure access to bank account data, promotes innovation, and empowers consumers with greater control over their financial lives.

  • Drives customer-centric innovation in payments, lending, and personal finance
  • Encourages new market entrants, partnerships, and embedded finance models
  • Serves as the foundation for the future shift toward Open Finance

The Evolution of EU Payment Services Regulation: From PSD2 to PSD3 and PSR

  1. The financial landscape is undergoing a profound transformation with the introduction of PSD3 (Payment Services Directive 3) and PSR (Payment Services Regulation). These groundbreaking regulations aim to harmonize the payments ecosystem, foster
    innovation, and enhance consumer protection while addressing the dynamic challenges of cybersecurity, digital identity, and cross-border payments.
  2. The PSD3 & PSR in Finance Summit 2025 in Brussels, the heart of European policymaking, will serve as a premier platform for regulators, industry leaders, fintech innovators, and stakeholders to explore the implications and opportunities of this transformative regulatory framework.
  1. The second Payment Services Directive (PSD2), formally known as Directive (EU) 2015/2366, marked a significant milestone in
    modernizing the EU’s payment services framework. Building on its predecessor, the Payment Services Directive (PSD1,
    Directive 2007/64/EC), PSD2 enabled innovation, enhanced competition, and strengthened consumer protection in the
    payments sector. However, the rapidly evolving payment landscape, marked by innovative payment solutions and increasingly
    sophisticated fraud mechanisms, necessitated further regulatory updates.
  2. In response, the European Commission introduced proposals in July 2023 for tthe Payment Services Directive 3 (PSD3, COM/2023/366) and the Payment Services Regulation (PSR, COM/2023/367) , aiming to replace PSD2. These initiatives seek to address the challenges of the modern payment ecosystem while enhancing consumer trust and market efficiency.

The Evolution of EU Payment Services Regulation: From PSD2 to PSD3 and PSR

Combatting Payment Fraud

  1. Recognizing the growing risks of payment fraud, the new framework emphasizes:
  2. .Enhancing strong customer authentication (SCA) measures.
  3. Facilitating secure information sharing among payment service providers while adhering to data protection standards.
  4. .Introducing extended refund rights for fraud victims.
  5. Mandating IBAN and account name matching for all credit transfers.

Enhanced Consumer Rights

PSD3 and PSR focus on:

  • Greater transparency in cross-border payments, especially concerning currency conversion charges and transfer
    timelines.
  • Clearer identification of payees in account statements.
  • Providing more straightforward ATM fee disclosures.

Advancing Open Banking

To streamline open banking processes:

  • Payment account providers must introduce consumer dashboards to manage and revoke access permissions for open
    banking providers
  • Measures are proposed to ensure continuity for open banking providers during technical disruptions by allowing
    temporary use of alternative interfaces.

Levelling the Playing Field for Non-Bank Providers

Non-bank providers such as payment institutions (PIs) and e-money institutions (EMIs) often face hurdles in accessing bank accounts. PSD3 and PSR address this by:

  • Requiring banks to provide substantive justifications for account access refusals.
  • Establishing smoother account access for non-bank providers.

Harmonization and Enforcement

To eliminate regulatory discrepancies across Member States:

  • Certain provisions of PSD2 are shifted to PSR, which, as an EU regulation, imposes uniform rules directly applicable
    across the bloc.
  • PSD3 consolidates the regulation of PIs and EMIs, simplifying licensing and supervision procedures.

The Scope of PSD3

PSD3 aims to consolidate the regulatory framework for PIs and EMIs, replacing PSD2 and the E-Money Directive (EMD2, Directive 2009/110/EC). Key changes include:

  1. A unified authorization process for PIs and EMIs, allowing PIs to offer e-money services.
  2. Alternative options for meeting initial capital requirements, such as €50,000 capital instead of professional indemnity
    insurance.
  3. Updates to safeguarding rules, including the option to secure funds in central bank accounts.
  4. Adjustments to capital requirements to reflect inflation

The Scope of PSR

As the first EU regulation directly applicable to payment services, PSR introduces updates to:

  • Transparency and information requirements for payment transactions
  • Strong customer authentication and exemptions.
  • Operational and security risk management.
  • Transaction risk analysis and obligations for all parties involved in payment transactions.

Impact on Existing PIs and EMIs

PIs and EMIs licensed under PSD2 or EMD2 will benefit from a 30-month grandfathering period following PSD3’s enforcement. During this time, they must align with updated criteria and seek reauthorization, unless their National Competent Authorities (NCAs) determine compliance through existing records.

Timeline and Next Steps

The proposals for PSD3 and PSR are currently under review by the EU Council and Parliament, with deliberations expected to
conclude by late 2024. Assuming an 18-month transition period, PSD3 and PSR are likely to take full effect by 2026.

Recent Developments, What’s Next?

As of November 2024, discussions are ongoing within the EU Parliament to finalize the regulatory text. Stakeholders, including
consumer advocacy groups, financial institutions, and fintech companies, have expressed broad support for the proposals while
urging clarity on implementation timelines and specific provisions, such as penalties for non-compliance and interoperability
standards.This comprehensive update will pave the way for a more secure, transparent, and efficient payment ecosystem
across the EU, fostering innovation while safeguarding consumer interests.

Why Our PSD3 & PSR Forum Is So Timely?

The PSD3 & PSR Forum comes at a pivotal moment as the EU payments industry prepares for sweeping changes under these
new regulatory frameworks. The evolving landscape of payment services requires stakeholders to adapt swiftly to new
compliance mandates, fraud prevention measures, and consumer protection standards.

  • Navigating Complexity: Our forum equips banks, Payment Service Providers (PSPs), and financial institutions with actionable insights to address emerging challenges, such as managing stronger customer authentication (SCA) requirements and integrating advanced fraud prevention systems.
  • Fostering Collaboration: The event offers a platform to engage with regulators, innovators, and peers, enabling a deeper understanding of the operational, technical, and strategic implications of PSD3 and PSR.
  • Driving Strategic Decisions: By participating, attendees will gain clarity on harmonized EU rules, facilitating better preparation for cross-border services, safeguarding funds, and achieving compliance with the enhanced transparency and consumer rights directives.
  • Competitive Edge: Our forum provides exclusive updates on how open banking enhancements and a level playing field can be leveraged to create innovative payment solutions, ensuring businesses stay ahead of the curve.

Europe’s Vision on the Future of Digital Payments

Europe’s ambitious vision for digital payments is centered on creating a seamless, secure, and unified payment ecosystem that fosters innovation while safeguarding consumer trust. PSD3 and PSR represent a significant stride toward this goal, addressing gaps in PSD2 and adapting to the digital transformation of financial services.

  • Enhancing Consumer Confidence: : With the implementation of stronger fraud prevention measures, extended refund rights, and improved transparency, Europe is prioritizing consumer trust in digital payments. This vision supports a thriving payments market where users feel secure in adopting digital-first solutions.
  • Empowering Open Banking: By eliminating barriers to data sharing and mandating dashboard-based consent management,
    the new regulations aim to amplify open banking’s role in driving financial inclusivity and enabling data-driven innovation.
  • A Unified Payment Ecosystem: PSD3 and PSR aim to harmonize rules across all EU Member States, reducing fragmentation
    and ensuring consistent enforcement. This unification eliminates inefficiencies, making cross-border payments smoother
    and more reliable.
  • Shaping Global Standards: Europe’s proactive approach to payment regulations sets a precedent for other regions,
    establishing the EU as a leader in modern payment governance. These efforts position Europe at the forefront of shaping
    global standards for digital payments.
  • As the EU moves toward implementing these frameworks, their impact will ripple across the financial services industry,
    reshaping payment solutions, compliance practices, and consumer experiences for years to come.

Who Should Attend?

The summit is designed for professionals and decision-makers navigating the evolving regulatory landscape, including:

  • Regulators & Policymakers: Shaping the framework for the next era of payments.
  • C-Level Executives: CIOs, CTOs, and compliance leaders driving innovation and security.
  • Fintech Innovators: Disrupting the market with cutting-edge solutions.
  • Banking & Payment Providers: Adapting to the demands of PSD3/PSR.
  • Cross-Industry Professionals: Retail, e-commerce, and other sectors integrating digital payments.

What Sets This Summit Apart?

The PSD3 & PSR in Finance Summit 2025 offers a unique blend of insights, actionable strategies, and networking opportunities:

    • Deep-Dive Panels Explore regulatory nuances, industry challenges, and opportunities with leading experts.
    • C-Level Executives: CIOs, CTOs, and compliance leaders driving innovation and security.
    • Interactive Case Studies Learn from real-world examples of PSD3/PSR implementations.
    • 1:1 Networking Connect with peers, regulators, and solution providers.
    • Strategic Workshops Address implementation challenges, compliance strategies, and emerging trends.
    • Key Takeaways for Attendees

 

 

Participants will gain:

  • Regulatory Insights A comprehensive understanding of PSD3/PSR and their implementation roadmap.
  • Actionable Solutions Strategies to overcome challenges in fraud management, compliance, and innovation.
  • Collaborative Connections Building partnerships across the payments ecosystem
                              • What is Open Banking?

Open Banking is a protected way of sharing customer’s financial information with third-party providers. With customer’s consent, banks can share account and transaction details with third parties through application programming interfaces (API). Open APIs enable exchange of information between the bank and third-party software provider. This helps banks to offer tailored products and services to acquire and retain customers.

For third-party service providers to be fully authorized to use Open Banking APIs, they must be registered under one of or both of the following:

AISP– Stands for Account Information Service Provider

PISP– Stands for Payment Initiation Service Provider

 

                              • What are Open APIs?

Open APIs expose a range of data to third-party financial service solution providers. They enable third-party developers to build applications and services around the financial institution.
These APIs are designed to support Open Banking regulations. Through the adoption and deployment of APIs, banks can extend and enhance their native services and offerings. Banks can rapidly advance their digital transformation agenda in the Open Banking world by leveraging third-party applications and service ecosystems that are enabled by API

 

                              • What are the benefits of Open Banking?

 

Advantages of Open Banking to Customers

                              1. Customer reaps the benefit of choice:
                                Most banks offer similar services that are limited in scope. More importantly, most banks aren’t really good financial advisors. With Open Banking, customers can reap benefit of choice as they have multiple options, or service providers to choose from. Therefore, you are not forced to use any specific software because it is bundled with your account.
                              2. More customized and relevant product offerings:
                                Most banking apps have the same set of service options. With entry of newer service providers, the factor of customisation and service personalisation will be introduced, which will massively benefit customers.

 

Advantages of Open Banking to Fintech

                              1. Easy Way For Banks to Extend Their Services:
                                Most banks have embarked on the Fintech journey. Open banking provides them with the opportunity to expand their offering sand include more services under their umbrella.
                              2. Meet The Customer Requirements:
                                Today’s customers are always looking for more. With open banking, financial institutions will have so much more to offer to their customers and keep them satisfied.

 

                              • Open Banking’s Five Key Challenges to banks

 

                              1. Deep customer apathy

The prerequisite for open banking is participation by customers who voluntarily agree to allow access to their data. It’s vital for open banking to take off. However, open banking aspirations appear to have fallen on deaf ears — on an average only 26% of customers globally favor adopting open banking; this percentage is much higher in emerging markets.

 

                              1. Lack of customer awareness.

As with any significant change, open banking requires massive education to familiarize customers with the concept and generate buy in. Customer apathy may well result from banks’ failure to effectively communicate and educate customers about the changes to banking terms and conditions that precede open banking.

 

                              1. Better entrenched competition.

As banks navigate their way to the digital era, they are confronted by several non-bank forces such as fintechs, new pure-digital entities, large non-banks such as Amazon and technology vendors. Each of these have begun rewriting the rules of the banking game and are creating a new banking ecosystem, challenging banks to respond.

 

                              1. Data sharing anxiety.  

Open banking relies on data sharing. This marks a paradigm shift for banks. Their difficulties range from the prospect of losing control over customer data and product cannibalization that might result. Banks appear to be struggling with how much customer data they can subject to exposure in order to participate meaningfully in the open banking ecosystem.

 

                              1. Legacy systems constraints.

Traditionally, departmental structures, product-centricity and compliance goals have influenced the rollout of core banking systems. Such legacy systems have become complex over time and are preventing effective interoperability with open banking APIs. The critical shift to customer-centric systems and agility enables banks to overcome the limitations of siloed legacy systems.

 

                              • What Is Strong Customer Authentication?
                                Strong customer authentication (SCA) is a requirement of the EU Revised Directive on Payment Services (PSD2) on payment service providers within the European Economic Area. The requirement ensures that electronic payments are performed with multi-factor authentication, to increase the security of electronic payments. Physical card transactions already commonly have what could be termed strong customer authentication in the EU (Chip and PIN), but this has not generally been true for Internet transactions across the EU prior to the implementation of the requirement, and many contactless card payments do not use a second authentication factor.

 

                              • What is the Strong Customer Authentication requirement?
                                SCA will require payments to be authenticated using at least two of the following three elements:
                                1) Something that the customer knows (e.g., password or security question)
                                2) Something the customer has (e.g., phone or hardware token)
                                3) Something the customer is (e.g., fingerprint or face ID)

 

                              • Which payments will be covered under SCA?
                                Strong Customer Authentication will apply to customer-initiated online payments within Europe. Most card payments and all credit transfers will require Strong Customer Authentication. Recurring direct debits are considered merchant-initiated and will not require SCA. A card payment will be in scope of the regulation if the cardholder’s bank and the business’s payment provider are both located in the European Economic Area (EEA).

 

                              • What are the implications of SCA?
                                One of the most important implication of Strong Customer Authentication (SCA) is that it will drive acquirers and other entities in the payment processing ecosystem to improve their fraud rate as that would mean they could offer frictionless flow at higher thresholds which will mean improved security in the payments space but it can also have an negative impact as its implementation can hinder customer experience and place additional burdens on merchants and Payment Service Providers (PSPs).

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