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EU Payment Regulators Crack Down on Security, Fraud and Scams

In an effort to safeguard customer data and reduce fraud and scams, European Union (EU) regulators are implementing a series of new regulations aimed at payment service providers (PSPs).

New Regulations

  • The Open Finance Framework is expected to be phased in over time, with non-payment accounts and banking products being opened up first, followed by other financial products.
  • The proposal for instant payments in EUR requires PSPs to provide 24/7, 365-day-a-year instant payments at no extra cost. The regulation also mandates IBAN checks, notification of customers about potential risks, as well as daily sanction screening.

MiCA Regulation

The EU has published a new regulation on markets in crypto-assets (MiCA), which aims to protect consumers and prevent fraud in the cryptocurrency market. The regulation will require crypto-asset service providers (CASPs) to comply with strict rules on authorization, supervision, and operation.

Consumer Credit Directive (CCD)

The European Parliament is expected to vote on a proposal for a Directive on Consumer Credit (CCD) later this year, which aims to regulate “Buy Now Pay Later” (BNPL) schemes and short-term high-cost loans.

Preparation

To prepare for these regulations, PSPs are advised to:

  • Identify concerned functions: involve all relevant departments in the organization.
  • Conduct impact assessments: identify changes required in existing processes, IT developments, security testing, business opportunities, and customer journeys.
  • Prioritize and plan developments: incorporate regulatory requirements into current strategic planning.
  • Assess budget and capabilities: determine the resources needed for roll-out and change.

Strengthening IT and Security Measures

PSPs are also advised to strengthen their IT and security risk management measures related to payment flows, ensuring they have an end-to-end view of all payment flows.

Ongoing Compliance

Compliance with regulatory requirements will be an ongoing process that requires continuous monitoring, regular enterprise-wide assessments, and adequate governance measures.

In light of these developments, it is essential for banks and other PSPs to assess the challenges and opportunities presented by PSD3, Open Finance Framework, Instant Payments, MiCA, and Buy Now Pay Later. For assistance in navigating these regulatory changes, please do not hesitate to contact us.