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Montenegro Aims to Boost Fintech Sector with PSD2 Compliance

In an effort to harmonize payment services regulations with those of the European Union, Montenegro has introduced a new law aimed at fostering innovation and competition in the fintech sector.

New Law on Payment Services

The Law on Payment Services, which came into force last year, ensures that provisions of payment services are regulated in line with EU standards. This law implements the Payment Service Directive 2 (PSD2), which aims to increase transparency and support increased competition across the European payment market.

Key Features of PSD2

While PSD2 does not significantly alter conditions for granting and maintaining authorization as payment institutions, it does recognize new entities such as:

• Third Party Payment Service Providers (TPPs)
• Enable novel types of services
  • Payment initiation service: IT companies can provide payment services using Application Program Interfaces (APIs).
  • Account information service: IT companies can provide account information to customers.

Enhanced Safety Standards

The law introduces enhanced safety standards by requiring payment service providers to apply reliable verification of customer authenticity in certain situations. Additionally, it allows for the possibility of reserving cash funds on a payer’s account when they have given consent for an exact amount to be reserved.

Compliance Timeline

Payment service providers and electronic money institutions that were already approved or authorized before the law came into force must harmonize their activities with the new regulations and inform the Central Bank within six months of its entry into effect. The law will come fully into force 12 months after its publication.

Expected Impact

The move is expected to attract new fintech players to Montenegro, boosting innovation and competition in the sector.