Three key 2024 milestones in EU payments regulation
Looking ahead to next year’s financial regulation in the European Union, there are three important developments set to shape the future of payment initiation services. Below we take a look at Instant Payment Regulation, EU Digital Identity Wallets, and the SPAA scheme with Tink’s Head of Industry & Wallets, Jan van Vonno.
The Instant Payment Regulation will ensure the payments can be settled in real-time. Allowing merchants to rely more on PIS for commercial use cases.
The European digital identity regulation should allow EU-wide acceptance of the government-issued Digital Identity Wallet for Strong Customer Authentication.
The European Payments Council’s SPAA scheme will unlock differentiated payment capabilities to overcome challenges created by the limitations in current accounts, such as daily payment limits.
2023 has been an important year for regulation that lays the groundwork for the advancement of open banking and open finance in the EU. We’ve previously covered the third Payment Services Directive (PSD3) and the new Payment Services Regulation (PSR1), as well as the Financial Data Access (FIDA) proposal, but there’s plenty more coming on the horizon. And beyond the regulations, we expect to see the first industry-wide voluntary premium API initiative take off.
Read on for Jan’s views on three of the most important upcoming milestones for 2024, which will be re-shaping the payments ecosystem over the next 3-5 years.
Instant Payment Regulation
The European Commission’s proposed Instant Payment Regulation will ensure real-time execution and settlement of payments across the entire eurozone. This unlocks a lot of potential, with one advantage being that it enables merchants to rely more on PIS for commercial use cases.
Challenges like delayed payment executions or the need to block funds will be a thing of the past with the new regulation.
Jan’s view: “The forthcoming Instant Payment Regulation has the potential to be a real game-changer. The widespread availability of instant payments across the eurozone was one of the missing bricks in making account-to-account payments a compelling payment method for merchants.”
EU Digital Identity Wallet
The proposed European Digital Identity Regulation will come with the introduction and EU-wide acceptance of a government-issued EU Digital Identity Wallet (EUDIW). The EUDIW will be accepted by any relying party, such as banks, who will need to allow customers to use the EUDIW for Strong Customer Authentication (SCA) when initiating a payment or accessing their account online.
In short, this will help to overcome some of the operational and consumer challenges that PIS currently faces. For example, it holds the promise to remove all major hurdles (such as manual entry of usernames and passwords, IBANs, and unnecessary screens) that users currently experience when going through the SCA flow, significantly reducing friction which should lead to higher conversion rates.
Jan’s view: “The EUDIW is a big leap for identity authentication. It means that services similar to Sweden’s BankID will become ubiquitous across the EU. This not only renders some of the biggest challenges with SCA obsolete but it can also bring a revolutionary shift in payments where both payer and merchant identities seamlessly become part of the transaction process.”
SPAA Scheme
Finally, the European Payment Council’s SEPA Payment Account Access (SPAA) scheme introduces a commercial framework for Premium APIs to unlock differentiated payment capabilities and address challenges created by common current account limitations – such as daily payment limits.
This scheme will help to give asset holders (such as banks) an opportunity to generate a healthy return on their PSD2 investments. One way is by providing premium features that allow asset brokers (such as Tink) to introduce differentiated payment services in the market.
Jan’s view: “With the SPAA scheme, we can overcome many of the limitations inherent to PSD2 and current accounts. We hope to find many banks joining the scheme as it will allow for the creation of payment guarantees, dynamic recurring payments, and automated sweeping capabilities between accounts in the same name.”
Here to help
As always, Tink is well placed to offer its insight and help with the next phase of EU financial regulation. We’re involved at many levels with many stakeholders and are truly excited at what’s possible with the combination of these regulatory advancements. The open banking, and wider financial, ecosystem looks like it’s moving in the right direction.
Get in touch if your business needs help adapting and optimising for the new world of finance.
---
Case studies, statistics, research and recommendations are provided “AS IS” and intended for informational purposes only and should not be relied upon for operational, marketing, legal, technical, tax, financial or other advice. Visa Inc. does not make any warranty or representation as to the completeness or accuracy of the Information within this document, nor assume any liability or responsibility that may result from reliance on such Information. The Information contained herein is not intended as legal advice, and readers are encouraged to seek the advice of a competent legal professional where such advice is required.
More in Regulation
Get started with Tink
Contact our team to learn more about what we can help you build – or create an account to get started right away.
