The new rules implement the EU’s recently-revised Payment Services Directive (PSD2) which aims to modernise Europe’s payment services so as to keep pace with this rapidly evolving market and allow the European e-commerce market to blossom.
The rules will allow consumers to use innovative services offered by third party providers, also known as fintech companies, while maintaining rigorous data protection and security for EU consumers and businesses. These include payment solutions and tools for managing one’s personal finances by aggregating information from various accounts.
According to a European Commission, the key objective of PSD2 is to increase the level of security and confidence of electronic payment. PSD2 requires payment service providers to develop strong customer authentication (SCA).
The new rules adopted by the Commission have stringent, built-in security provisions to significantly reduce payment fraud levels and to protect the confidentiality of users’ financial data, especially relevant for online payments.
They require a combination of at least two independent elements, which could be a physical item – a card or mobile phone – combined with a password or a biometric feature, such as fingerprints before making a payment.
PSD2 also establishes a framework for new services linked to consumer payment accounts, such as the so-called payment initiation services and account information services.
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