The revised EU payment services directive (PSD2) applies from 13 January 2018 and widens the scope of the previous regulations by covering new services and players, as well as by extending the scope of existing services (payment instruments issued by payment service providers that do not manage the account of the payment service user), enabling their access to payment accounts.

PSD2 updates the telecom exemption by limiting it mainly to micro-payments for digital services, and includes transactions with third countries when only one of the payment service providers is located within the EU.

It also enhances cooperation and information exchange between authorities in the context of authorisation and supervision of payment institutions. The European Banking Authority (EBA) will develop a central register of authorised and registered payment institutions.

The new rules will prohibit surcharging, which are additional charges for payments with consumer credit or debit cards, both in shops or online, and will also introduce strict security requirements for electronic payments and for the protection of consumers' financial data.

Other consumer benefits reducing the liability for non-authorised payments and introducing an unconditional (‘no questions asked’) refund right for direct debits in euro.

Consumers will also be better protected when the transaction amount is not known in advance, can occur in the case of car rentals, hotel bookings, or at petrol stations. The payee will only be allowed to block funds on the account of the payer if the payer has approved the exact amount that can be blocked. The payer's bank shall immediately release the blocked funds after having received the information about the exact amount and at the latest after having received the payment order.

Valdis Dombrovskis, EU vice-president responsible for financial stability, financial services and capital markets union said: ‘This legislation is another step towards a digital single market in the EU. It will promote the development of innovative online and mobile payments, which will benefit the economy and growth. With PSD2 becoming applicable, we are banning surcharges for consumer debit and credit card payments. This could save more than €550m (£489m) per year for EU consumers’.

Open banking

The UK has adopted the EU directive already, via the Payment Services Regulations 2017. Separately, as a result of a Competition Markets Authority (CMA) review of retail banking, the UK is now also rolling out open banking.

The Open Banking Implementation Entity (OBIE) was created by the UK’s nine largest personal and small business current account providers (CMA9) in 2016 to create a secure set of technologies and standards that allow customers to give companies other than their bank or building society permission to securely access their accounts.

Over the course of the next six weeks the OBIE will bring the UK’s largest account providers and regulated third parties online and fully test the system using selected testing accounts only, in order to ensure the system is stable and fully secure.

Imran Gulamhuseinwala, trustee of the OBIE, said: ‘This is a major step towards giving the customer real ownership and control of their finances and data. From 13 January, regulated companies can start integrating with open banking and testing their products.

‘Then, from March 2018, consumers and small businesses across the UK can start to make the most of a dynamic new range of financial services.’

The changes in regulation have been welcomed by suppliers of personal finance apps, who offer services whereby users can bring together all their financial and banking information into one place in order to compare banking offers.

Steve Tigar, CEO of Money Dashboard, said: ‘By allowing people to integrate all their online banking accounts, from all providers, into one app, we have been promoting financial responsibility and financial inclusion to hundreds of thousands of our customers.

‘The terms and conditions of the UK's large banks have previously placed impediments in the way of our service, with customers concerned about breaching the terms of their account by using our app.

‘Customers now have the legal right to permission our service to use their banking data. This is a big day for our company, but more importantly it is a liberating day for our customers, who have driven the demand for services like ours.’

Report by Pat Sweet