The Payment Services Directive 3 (PSD3) is a new law that is being proposed by the European Commission. It is designed to update the current PSD2 directive and to make online payments in the EU safer, more secure, and more efficient.
What is PSD3?
PSD3 is a piece of legislation that sets out the rules for payment services in the EU. It covers a wide range of topics, including:
- Strong customer authentication (SCA)
- Open banking
- Instant payments
- Regulatory sandboxes
- Payment initiation services (PIS)
- Account information services (AIS)
What are the key differences between PSD2 and PSD3?
There are a number of key differences between PSD2 and PSD3. Some of the most important differences include:
- Strong Customer Authentication (SCA): PSD3 will require SCA for all online payments. This means that users will need to provide two or more factors of authentication when making a payment, such as a password, a one-time code, or a fingerprint scan. This will help to reduce the risk of fraud and unauthorized payments.
- Open Banking: PSD3 will expand the scope of open banking. This means that banks will be required to share more data with third-party providers, such as account information and payment initiation services. This will make it easier for consumers to compare financial products and services, and to switch banks.
- Instant Payments: PSD3 will introduce instant payments in the EU. This means that payments will be processed and settled in real time. This will make it easier for businesses and consumers to make and receive payments quickly and easily.
- Regulatory Sandboxes: PSD3 will create regulatory sandboxes. This means that businesses will be able to test new payment services in a controlled environment. This will help to promote innovation in the payments market.
- Payment Initiation Services (PIS): PSD3 will allow consumers to initiate payments to merchants directly from their bank accounts. This will make it easier for consumers to make payments and will reduce the need for third-party payment providers.
- Account Information Services (AIS): PSD3 will expand the scope of account information services (AIS). Banks are required to share more data with third-party providers. This will make it easier for consumers to manage their finances and compare financial products and services.
What are the benefits of PSD3?
The benefits of PSD3 include:
- Increased security for online payments
- More innovation in the payments market
- Improved customer convenience
- Reduced fraud
- Increased competition in the payments market
When will PSD3 be implemented?
The implementation of PSD3 is expected to take place in 2025. However, some of the requirements of PSD3, such as SCA, will be implemented sooner.
What does PSD3 mean for businesses and consumers?
PSD3 will have a significant impact on businesses and consumers in the EU. For businesses, it will mean that they will need to comply with new rules on SCA and open banking. This could be a challenge, but it could also open up new opportunities for businesses to innovate and provide new payment services.
For consumers, PSD3 will mean that they will have more control over their payments. They will also be able to benefit from new payment services, such as instant payments.
Overall, it is a significant piece of legislation that will have a major impact on the payments market in the EU. It is designed to make online payments safer, more secure, and more efficient.
What are the challenges of PSD3?
There are a number of challenges that businesses and consumers may face with PSD3. Some of the most important challenges include:
- The cost of compliance: PSD3 will require businesses to make changes to their IT systems and processes. This could be a significant cost, especially for small businesses.
- The complexity of the rules: PSD3 is a complex piece of legislation. This could make it difficult for businesses to understand and comply with the rules.
- The lack of awareness: Many businesses and consumers may not be aware of PSD3. This could lead to non-compliance with the rules.
How can businesses and consumers prepare for PSD3?
Businesses and consumers can prepare for PSD3 by:
- Understanding the rules of PSD3
- Making changes to their IT systems and processes
- Raising awareness of PSD3 among their staff and customers
Is your business ready for PSD3?
PSD3 is a significant piece of legislation that will have a major impact on the payments market in the EU. It is designed to make online payments safer, more secure, and more efficient. When you work with ShareID, you can provide your customers with a strong customer authentication solution tied to their government-issued IDs in real time and with a simple smile. With its patented technology, ShareID can validate a person's liveness and create a verifiable and reusable digital identity without storing any of their personal data or biometrics. Request a demo today and see how ShareID can help you become PSD3 compliant.
