Enhancing the EU payment services framework : the impact of PSD3

Abstract

The adoption of the Second Payment Services Directive (PSD2) marked an important step in the European Union’s efforts to revise the payment services framework and enhance competition, innovation, and consumer protection within the internal market. While PSD2 extended regulated payment services and established new service providers, its implementation revealed several structural and legal shortcomings. Due to the sector’s technical complexity and rapid evolution, PSD2’s implementation varied across Member States. Issues stemmed not only from inconsistent national implementation but also from ambiguities and omissions in the directive, especially regarding definitions, licensing, and the scope of regulated services. These deficiencies enabled regulatory arbitrage and forum shopping, weakening the goal of a harmonised internal market. Moreover, new financial technologies and growing intersections with related frameworks revealed further gaps in the regime. The complexity and fragmentation of PSD2, alongside the need to resolve regulatory inconsistencies and adapt to technological developments, led to the introduction of PSD3 and associated regulatory measures. The dissertation evaluates the extent to which PSD3 addresses PSD2’s shortcomings, especially in reducing the uneven application of rules and ensuring uniform enforcement across the European Union. It outlines the development of the EU payment services framework, and assesses PSD2’s shortcomings, focusing on definitional ambiguities and regulatory fragmentation, and evaluates PSD3’s proposed amendments, including the restructuring of payment services, consolidation of licensing and improved supervisory coordination. Furthermore, the study examines PSD2’s interaction with other frameworks, specifically the Markets in Crypto-Assets Regulation, assessing the regulatory overlap and the degree to which PSD3 offers solutions. The role of EU institutions will also be examined, including the European Banking Authority, and local implementation. The dissertation finds that while PSD3 enhances legal clarity, streamlines authorisation and encourages supervisory convergence, it does not completely address the causes of fragmentation. While it mitigates regulatory arbitrage, it does not eliminate it.