The Impact of Payment Services Directive 2 (PSD2) on Financial Services in the European Union Single Market

Anna Masłoń-Oracz, Ayo Eso

The paper looks into the impact of PSD2 on payments system as it relates to the disruption of banks and the expansion of non-bank institutions, the financial technology companies (fintechs) in the process of expanding the payments systems in the European single market. The paper explains why there is a view that PSD2 will contribute the expansion of payment systems beyond the involvement of banks in Europe and portrays the impact and disruption that will be caused by fintechs to the traditional payment systems. The paper considers the rationale behind the PSD2 directive establishing a framework to respond to the significant innovation within the sector, removing regulatory gaps and legal uncertainties. PSD2 is the basis for innovative processes that allow payment service providers to launch digital payment services. It reviews current discussion and the activities of fintechs and banking disruption across the single market as well as examines specific cases where digital payment services have forced banks to change service delivery and its impact. Analyses focus on the fact that PSD2 amends the existing regulatory framework for payments within the European Economic Area. Fintechs are responding to changes to the scope of regulated activities, a trend towards customers with multiple relationships with service providers and increased need for interaction. The technical and legal landscape has started to change, and third-party service providers are now regulated entities. In conclusion, PSD2 will strengthen consumer rights in several ways, as Consumers have control over how they carry out payments.