Single Euro Payments Area (SEPA) is an initiative of the European Union intended for simplifying and harmonising euro-denominated electronic payments across participating countries. It was supported not only by EN countries but also by four member states of the European Free Trade Association (such as Iceland, Liechtenstein, Norway, and Switzerland) and Great Britain. This initiative particularly implies adopting the Revised Payment Services Directive (PSD). Its purpose was the appearance of a unified payment system that allows individuals, businesses, and organisations within the UN jurisdiction to make cross-border euro transactions as efficiently as domestic ones.

However, the rapid growth of payment technologies revealed the need for more than the first version of the PSD covered. It led to upgrading it to PSD 2 in 2015. The new version was designed to enhance consumer protection, promote innovation, and foster competition among payment service providers (PSP). Due to bureaucracy and other issues, PSD 2 was fully implemented only on 31 December 2020. Partly because of this delay and partly because of each passing year’s accelerating technological development, PSD 2 has already become outdated. It has prompted the development of PSD 3.

Key Differences of PSD 2 vs PSD 3

As the financial landscape evolves, so do the regulations governing it. PSD 2 was a timely and necessary solution, but the ever-changing payment environment leaves no choice but to continue enhancing regulatory acts. PSD 3 is an attempt to improve the directive by considering new realities in the financial sphere. Any business’ economic stability and profitability must comply with the UN’s new law requirements before they come into effect. Crossbill helps you harmonise your business routine with the PSD 2 rules and prepare for the new ones of PSD 3. So, let’s see the main differences between these two versions:

• Client’s security. PSD 2 mandates two-factor authentication for electronic payments to make transactions more protected. This security process requires users to enter two or more pieces of evidence to verify their identity before gaining access to a system, application, or account. It can be a password, PIN, PUK, a bank card, a fingerprint, an eye scan, etc. It’s expected that PSD 3 will enhance security measures even further, as fraudsters constantly try to improve their criminal tricks to access other’s accounts and transactions.
• Focus on open banking. PSD 2 Initiated open banking, a financial services model that allows third-party providers (TPPs) to securely access a customer’s financial data, with their consent, through standardised application programming interfaces (API). Its popularity and relevance were among the main reasons for designing PSD 2 and also caused the upgrade to PSD 3. The last one will focus on expanding and improving open banking principles and developing its ideas.
• Deeper addressing new technologies. In PSD 2, the attention to emerging technologies could have been more extensive. PSD 3 will focus more on state-of-the-art technologies like cryptocurrencies and fintech. They provide quicker and more reliable transactions, as well as improve fraud prevention. 
• Consumer rights. PSD 2 aims to improve transparency and clients’ rights. This is vitally important for their confidence in a reliable financial system within UN and SEPA jurisdiction. Further enhancements in this sphere are anticipated for PSD 3.

With the rapid financial landscape development, it became apparent that current regulatory mechanisms needed to be updated. It resulted in creating a particular directive, which was considered a changed economic environment. With further technological amendments, another level of regulation was required, so the European Union upgraded the directive to PSD 2. Only a few years pass, and it becomes clear that further enhancements are needed, and PSD 3 is being designed. Crossbill helps you understand the fast payment laws changes to grow your business successfully.