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New EU payment rules to open up banking market

New European rules freeing up online payments and banking take effect on Saturday. In Finland, the Financial Authority has banned a screen scraping technique that can bypass bank authorizations.

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Image: Vesa Moilanen / Lehtikuva

The Payments Services Directive 2 (PSD2) was approved by the EU two years ago already, but it only comes into effect in Finland and other parts of Europe starting on January 13. Among other things, the changes allow retailers and consumers to bypass banks by authorizing payments directly from personal accounts. This will reduce the future role of powerful banks as the sole facilitators of money transactions in Europe and encourage third-party money service providers.

The European Commission says the change is intended to give bank customers more services and opportunities to use various payment accounts. The new options also focus on making future transactions safer and easier. It sets up a necessary legal platform for the introduction of a Single Euro Payments Area (SEPA) that will make electronic payments in the internal market better integrated.

Harmonised safety standards for the industry are still being finalized, but are expected to reach the EU Parliament in the autumn of 2019.

The new rules also lift any added merchant charges when paying by credit card or bank transfer for online purchases and limit fees on debit and credit card transactions. Representatives of Nordea Bank, for example, confirm that consumer liability for unauthorised credit card payments will fall from 150 to 50 euros.

Making e-commerce more secure

The new revision of the first version of the Payment Services Directive will introduce strict security requirements for electronic payments and for the protection of consumers' financial data.

Finland has taken steps to prohibit so-called screen scraping, or the practice of reading text data from a computer display terminal's screen. The country's Financial Authority sought fit to ban it because it also allows third parties to access financial account data that is not included in the scope of the new directive.

Still approved by the European Banking Authority (EBA), screen scraping is widely used in Europe to copy a customer's bank codes for conversion into a table that can be easily read. It allows service providers to access customer accounts without them having to go in and verify each transaction.

The PSD2 revision strengthens the role of European Banking Authority moving forward. Among other things, it will have leave to develop a central register of authorised payment institutions and develop more rigorous customer authentication techniques.

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