The Payment Services Directive (PSD) endeavours to create the most integrated and effective financial services market and reduce the number of payments systems available in Europe by November 2009. Although it was issued as a single, EU-wide document by the European Parliament, there is scepticism about whether it will achieve its objective of enabling harmonised legal terms and conditions for payment services across the EU. With its introduction scheduled for November 2009, the challenges presented by the legal obligations and technical requirements of the PSD will be closely monitored by the banks.

The market’s difficulty in understanding the PSD’s scope across the different countries is likely to be the most obvious challenge to PSD implementation and its progress to date. This is in part due to the complicated nature of the Directive. For example, the PSD only applies to electronic payments that are in Euro or a member state currency and which have both endpoints in the EU. There is also the contradictory ability for countries to take a bespoke approach to the Directive itself. By outlining a number of permitted national opt-outs in the transposition of the PSD, the EC has diluted the uniformity of the Directive itself.

Given the number of provisions involved and the tight timeframe for implementation, it is highly likely that the go-live date for the PSD will differ from country to country. Such a situation could lead to a challenging scenario where payments may be covered by the PSD in its source country, but not in its destination one.

While there has been much discussion around the implementation challenges of the PSD at a policy and content level, the IT changes that financial institutions may have to make in order to become PSD-compliant are significant. Despite the best of intentions to create a harmonised payments framework within the EU, it seems that the PSD’s vision of standardising the payments industry still has some way to go before it can become a reality. In the meantime, the market will be paying closer attention to the impact it might have on their operations and IT requirements.

Bob Mackman
Head of Business Services (Wholesale)