On 2 February 2017, HM Treasury published a consultation paper on the implementation of
PSD2 explaining the scope and key changes compared to PSD. The consultation outlines the
Government's proposed approach to implementation and requests input from stakeholders. The
consultation closes on 16 March 2017.
On 2 February 2017, Her Majesty's Treasury (HM Treasury)
published a consultation paper on the implementation of the revised
European Union (EU) Directive 2015/2366 on payment services in
the internal market (PSD2). PSD2 must be implemented in the
United Kingdom (UK) by 13 January 2018. In order to keep the
transition as smooth as possible, the Government aims to finalise
and present the final version of the relevant regulations before
Parliament in early 2017.
In its consultation paper, HM Treasury explains the scope of PSD2
and highlights its key changes compared to the first Payment
Services Directive (PSD). The types of Payment Service Providers
(PSPs) covered in PSD2 include payment, credit and e-money
PSD2 preserves PSD's exemption on transactions executed by
means of telecommunication, digital or IT devices. PSD2 updates
this exemption to permit providers of electronic communication
networks or services to provide certain goods, such as music and
digital newspapers, without authorisation or registration.
PSD2 also provides clarification regarding the limited network
exemption by making explicit that the exclusion can only apply to
transactions where the payment instrument can be used within a
specified retailer/retail chain, and where the payment instrument is
regulated for specific social or tax purposes. For example, store
cards, fuel cards and public transport cards would fall within this
Likewise, PSD2 continues to exempt independent ATM operators
from authorisation but will require independent ATM operators to
be subject to the same transparency requirements for services
provided as banks and other PSPs.
Additionally, the geographical scope of PSD2 transparency and
conduct of business requirements has been extended to apply to
'one-leg' transactions (payments to and from third countries,
where one of the PSPs is located in the EU) and to transactions in
non-EU currencies which have at least one leg in the EU.
Proposed approach to implementation
The Government outlines its proposed approach to PSD2
implementation in the consultation paper. Appendix B contains a
draft version of the Payment Services Regulations 2017 (PSRs
20 I 7), the statutory instrument that the government will use to
implement PSD2 in the UK.
The Government's intention is to build on the existing framework
in order to ensure consistency with the European framework, but
also to keep the payment services regime as tailored to the UK
payment market as possible. For this reason, the draft PSRs 2017
largely reflect the Payment Services Regulations 2009 provisions
but with changes to capture PSD2 modification. Consequential
amendments to other pieces of legislation, such as the Electronic
Money Regulations 2011, may also be required, but these
amendments will be included in the final draft of the PSRs 2017.
The consultation paper notes that the Financial Conduct
Authority (FCA) will remain the relevant competent authority
and produce supervisory procedures for passporting,
registration, settlement of disputes and any non-compliance,
including precautionary measures.
The consultation paper also provides the proposed
responsibilities of firms seeking full authorisation, in respect of
issues such as capital requirements and safeguarding funds
received by a payment institution in the course of executing
Notably, the consultation paper also provides new rules to
ensure that credit institutions provide access to payment
account services (including to new market entrants) on a
proportionate, objective and non-discriminatory basis. The
government proposes to keep the same conditions for the
exemption for Small Payment Institutions regarding
The consultation also outlines new rules for Account
Information Services and Payment Initiation Services, noting that
'the PSD II obligations are closely aligned with the government's
vision for enhancing competition in the retail banking market
through the delivery of an Open Banking Standard'. These new
services introduced by PSD2 represent some of the most
important changes to the payments industry, and have the
potential to significantly alter competition within the industry.
The consultation paper also outlines transparency and
information requirements for PSPs and new conduct of business
Appendix A of the consultation paper provides a list of questions
for stakeholders to provide their input to the Government's
approach. Stakeholders can submit their responses to
[email protected] by 16 March 2017.
DLA Piper's financial services regulatory and payments teams can
provide you with tailored advice on the implications of PSD2 on
your business. Please contact the authors for further