Published in ECONOMIST & JURIST
Madrid, 4 de Mayo 2020
The aim of this new legislation is to guarantee online payments and prevent fraud. Financial organisations are required to open up their payment services to third parties who are authorised by users. These third parties are external payment providers, known as TPPs (Third Party Providers), and the PSD2 established two different types: PISP (Payment Initiation Service Providers), who enable payments by bank transfer where previously they could only be made by card, and AISP (Account Information Service Providers), who gather users’ account information so that users can access all their banking data through a single provider.
There are two key components to this new legislation: The first is the sharing of information by freeing users’ financial data with their prior authorisation to increase competition in the sector. The second is improved transaction security by implementing more robust methods for identifying and authenticating users who make payments with the aim of guaranteeing and boosting competition, creating added value. It furthermore aims to improve payment security and efficiency, provide increased consumer protection, strengthen the European payment market by standardising regulations between the different EU countries, and continue to promote innovation and adaptation to new technologies by the financial sector.
This new regulatory framework provides many advantages for the development of the electronic payment market in the EU. It increases competition in the sector, with new operators offering users greater choice and competitive prices, and strengthens the security of operations with double authentication. The aim is to reduce fraud and make transactions more secure. From the countless advantages for the consumer, the following are worth highlighting:
– Greater information and transparency. The user will know all expenses associated with each transaction, as well as their status and timeframe for execution, with no added cost.
– Ease of cancellation for any operation without the need for prior notice, unless agreed otherwise. This facility will not be free if the contract between the user and the provider is for less than six months.
– Rectification of unauthorised operations as soon as the user becomes aware of them. The user has the right to request a refund and, in the case of discrepancies, it will be the payment provider who needs to demonstrate that an operation has been carried out correctly, in accordance with banking security legislation, and that they have the necessary authorisation.
– Limited liability when the user is the victim of fraud, with a customer liability of €50 instead of the previous amount of €150.
– Reduced fraud and increased banking security through the implementation of stronger authentication measures, using at least two of the following three methods: inherent measures, such as fingerprint, iris or face recognition; a physical reference such as a card, digital certificate or a mobile phone; and thirdly, known information, such as a PIN or password.
The banking sector is using Open Banking technology to analyse the importance of data and make use of commercial strategies and opportunities. The technology is a fundamental part of purchasing financial products and services remotely, using greater connectivity to gather and transfer data, a more comprehensive Internet of Things and the convergence between fixed and mobile technologies. Looking specifically at this sector, this will lead to the definitive roll-out of virtual assistants, as well as an increase in communication security through the use of technologies such as Blockchain or Machine Learning.
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