From 13 January 2018, all EU member states are to apply the provisions of Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market (the “Second Payment Services Directive” or “PSD2”).
The purpose of PSD2
Latvia is to pass the PSD2 provisions into its national legislation governing payment services.1
PSD2 aims to enable secure electronic payments and to improve consumer protection and competition in the area of electronic payment services. At the same time, PSD2 opens the payment services market to various FinTech companies offering advanced electronic payment solutions.
PSD2 adds two new types of services – a payment initiation service and an account information service – to the existing range of payment services.2
Payment initiation services
A payment initiation service is an online service that initiates a payment instruction requested by a payment service user relating to a payment account held by another payment service provider. This means that with the customer’s permission, an institution at which he has not opened an account can access his payment account with a credit institution in order to make money transfers in the customer’s name. When making a purchase at an online shop, the customer does not need to connect to his online bank since the company running the online shop can receive payments through a payment initiation service provider directly from the customer’s account with any credit institution. This service enables customers to make faster payments to online shops. It does not, however, mean that payments at online shops can be made only in this way, as customers not wishing to use a payment initiation service can continue making payments as usual.
Account information services
An account information service will help a customer receive consolidated information about the contents of all his bank accounts. By gaining access to customer account details, the service provider will be able to provide consolidated information about all accounts the customer has opened at different credit institutions, enabling him to review his financial position and plan his finances in a better way. However, before providing an account information service, the service provider has to receive the customer’s express consent to obtaining data from his payment accounts.
Although the two payment services described above are already available in several member states, PSD2 makes them available to consumers across the EU, subject to tight security requirements. The inclusion of these services in PSD2 also means that their providers will be licensed and supervised. A licence issued by the Latvian Financial and Capital Market Commission will allow a payment service provider to operate across the EU, while a licence issued by the competent supervisory authority of another member state will allow a payment service provider established in that member state to offer his services in Latvia and elsewhere in the EU.
1 The Payment Services and Electronic Money Act, various regulations issued by the Financial and Capital Market Commission, and directly applicable EU Regulations.
2 Under PSD 1, payment services only include placing and withdrawing funds, making payments and maintaining payment accounts, issuing payment instruments, accepting payments, and making money remittances.