The European Union (EU)cannot afford to continue with costly payment services if it wants to be globally competitive, said a Member of the European Parliament (MEP) following an informal agreement on future payments services.
The agreement between the Economic and Monetary Affairs Committee MEPs and the Latvian Presidency of the European Council – part of Payment Services Directive (PSD2) proposals – says payment services will be updated to make them more secure, increase customer choice and stimulate innovation.
Banks currently control payment infrastructures, but regulators want to loosen the banks' grip on them to introduce competition, which will stimulate competition, lower costs and drive innovation.
The informal agreement will be discussed further by MEPs, the Council of Ministers and the European Commission.
“The updated rules aim to stimulate competition to provide payment services and foster innovative payment methods, especially for online payment services,” said a European Parliament statement.
The rules still need to be endorsed by the European Parliament as a whole and the European Council.
Read more about the Payments Systems Regulator
- The Financial Conduct Authority has opened up the payments market to service providers.
- Increased competition in the financial transactions sector has moved a step closer, with the Payments Systems Regulator overseeing the payments sector.
- The Payments Systems Regulator could oversee Visa and Mastercard payments after the government launches a consultation on its role.
MEP Antonio Tajani said the EU payment services market is fragmented and expensive, costing €130bn, or over 1% of EU GDP, a year.
“The EU economy cannot afford these costs if it wants to be globally competitive,” he said. “The regulatory framework will reduce costs, improve the security of payments and facilitate the emergence of players and innovative mobile and internet payment methods.”
Under the proposed rules, those making payments using an online account would have the right to use payment software or devices provided by an authorised third party and have payments executed on their behalf by this provider. Banks, which control payment infrastructures, will only be able to deny access to account details if there is a genuine security risk.
Under the rules, payment service suppliers will also be forced to adopt technologies that ensure safe authentication of the user and reduce the risk of fraud.
Following more talks between MEPs, the Council of Ministers and the European Commission on the proposals and when final agreement is reached, Parliament will put it to a plenary vote. This will also need to be endorsed by EU member states.
In the UK, the Payment Systems Regulator (PSR), which launched in April 2015, intends to boost competition in the £75tn UK payments sector.
The PSR will oversee the sector and encourage players to innovate and create value for consumers. The largest payment systems are owned and managed by the big banks and there are concerns the sector lacks transparency and innovation.