What do the upcoming regulations mean for the payments sector?

Before starting the panel discussion, Hellmann asked the audience what topic of the upcoming regulation was the highest priority for their institution. In line with the conference’s main theme, 79% of respondents said instant payments were a clear priority.

Addressing the survey results, Hellmann first turned to Epifânio, who provided a detailed overview, from the European Commission’s point of view, of what is happening in the regulatory landscape. Epifânio explained that while he could not say much that the public did not already know, the European Commission was working with the Council and Cabinet to develop updated versions of the PSR and PSD3 proposals. “As for the (European) Council, we have just concluded our last meeting and are preparing progress reports on PSR and PSD3.”

Complementing Epifânio’s updates, Del Guerra explained that they are working together to ensure readiness for instant payments. He noted that instant payments are a big market opportunity and key to the survival of SMEs, so his priorities are to collaborate to develop value-added solutions and services in this space.

Flood emphasized that standardization is a key element of the upcoming changes. “We need to standardize across the board, which would enable much more innovation.”

Referring to the issue of standardization, Epifânio explained that it was an idea that was considered but ultimately rejected when developing the PSR proposal. “The reality is that there is no common standard in the EU. People use different standards and there are currently no preferred APIs, so how do we recommend choosing one over the other? We decided not to pursue it because we didn’t see the impetus to go in that direction.

The conversation then turned to who is the ultimate benefactor of upcoming regulatory updates in space. Malley commented: “The entire regulatory package is clearly designed to primarily benefit consumers through choice, as well as fintechs and SMEs. From the bank’s perspective, you have to figure out how to put it together. The PSD2 directive has opened up the possibilities of open banking and we are seeing growing interest from sellers in how to use it. However, commercial incentives are needed to make it attractive to all parties in the ecosystem.”

In terms of implementation, Malley stressed that there is still a lot of work to be done with the regulatory package and that the obligation to comply with it makes it difficult to innovate in other areas of the business. Fraud in particular is an issue at the moment, with the UK in particular also likely to soon face reimbursement requirements for app fraud.

Del Guerra commented: “Clearly there is a difference in FI’s strategic approach and we find that some players in the market are not ready – and it is difficult to be ready for something that no one can control. There has been a lot of effort on infrastructure on the FI side, but operations also need to be looked at. There is much debate about fraud, but another complex challenge is meeting customer expectations. They expect faster and easier payments.”

When asked what implementation milestones financial institutions need to consider, Del Guerra commented: “Of course, first and foremost, compliance is the most important thing. Then: plan and test. Then there’s the infrastructure, which will take some time. If you haven’t started yet, this is a problem. The second part is customer engagement. You need to develop a strategy for what you will do with the new regulations, starting with instant payments. Each FI will have its own proposal. And finally, the last point is collaboration – think about how you collaborate with other players in the payments space to provide solutions.”

Flood agreed, stating that without FI cooperation there is a risk of stagnation. In particular, instant payments in the UK are something that most institutions use, so the amount of data available is extremely important. He emphasized that now is the time to start talks and establish cooperation.