Introducing PSD2: What is it and What Does it Mean for You?

On 13th January 2018, we are making some changes to our terms and conditions, which govern the international money transfer service we provide. We are introducing these changes to be in line with the new Payment Services Directive 2 (PSD2), which comes into effect on the same day.

When the updated terms and conditions come into effect, they will be available on our Important Information page. In the meantime, we wanted to provide a little bit more information about these changes and what Brexit might mean for financial regulations in the UK.

What is PSD2?

The original Payment Services Directive was published by the EU in late 2007. Its main aims were to improve consumer protection and transparency, set common standards for terms and conditions, regulate payment institutions and help develop the Single Euro Payments Area (SEPA). In the UK, this directive was implemented through the Payment Services Regulations in 2009, which is regulated by the Financial Conduct Authority (FCA).

In 2012, the Payment Services Directive was reviewed by the European Commission and revised legislation was proposed in 2013, known as the Payment Services Directive II (PSD2). This comes into force on 13th January 2018. In the UK, it will be implemented through the Payment Services Regulations 2017, which will be regulated by the FCA.

The regulations have been updated to reflect industry changes, including market developments, customer needs and technological advances. The main aims are to promote innovation, make payments safer and more secure, offer better protection to consumers and reduce the cost of payment services.

There is also some alignment between these goals and the UK government’s Open Banking initiative, which was created by the Competition and Markets Authority to give consumers more control over their data and to drive innovation and competition in UK retail banking.

What happens after Brexit?

Shortly after the vote to leave the EU, the FCA provided a statement on the implications of this decision. This stated that:

“Much financial regulation currently applicable in the UK derives from EU legislation. This regulation will remain applicable until any changes are made, which will be a matter for Government and Parliament.

Firms must continue to abide by their obligations under UK law, including those derived from EU law and continue with implementation plans for legislation that is still to come into effect.

Consumers’ rights and protections, including any derived from EU legislation, are unaffected by the result of the referendum and will remain unchanged unless and until the Government changes the applicable legislation.”

Payments UK, who represent the payments industry in the UK, also included a comment on Brexit in their PSD2 briefing, which re-iterated the FCA’s message and added:

“Any changes ultimately required within the UK payments industry as a result of the referendum outcome will need to be scheduled and prioritised into existing industry long-term strategic planning.”

It is clear that UK companies will be required to comply with the requirements of PSD2, at least until the UK leaves the EU. As the directive has been integrated into UK law, the requirements are also likely to remain in place, at least in the short term, after the UK has left the EU.

The UK government could choose to make changes to this legislation once the UK has left the EU. However, as the chairperson of the European Banking Authority chairperson, Andrea Enria, explained in a speech to the Westminster Forum, the objectives of PSD2 appear to be shared by the UK authorities and the UK played a significant role in the directive’s development. He then suggests, “I have therefore little reason to believe that the UK authorities will drastically change their policy approach at the moment the UK exits the European Union”.

Do I need to do anything?

We recommend that our clients read the updated terms and conditions when they are made available on our Important Information page on 13th January 2018. You may also want to print or save a copy of the new terms for your records.

If you have any questions or concerns, please contact us and we’ll do everything we can to help.

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While we take reasonable care to keep the information on the website accurate and up to date, there may be occasions when this is not possible. Case Studies and articles are not intended to predict future moves in exchange rates or constitute advice.

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