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Unlocking Opportunities: European Commission Empowers Consumers and Businesses through Modernized Payment Services and Open Financial Data

On 28 June 2023, the European Commission has introduced proposals to modernize the financial sector and payments in the digital age, aiming to enhance consumer protection and competition. These measures enable consumers to securely share their data, leading to a wider range of affordable and superior financial products and services. The proposals prioritize consumer interests, competition, security, and trust.

The payment services market has experienced significant growth in recent years, with electronic payments in the EU reaching €240 trillion in 2021. The COVID-19 pandemic accelerated this trend, accompanied by the entry of new providers offering "open banking" services. However, sophisticated fraud poses risks to consumers and erodes trust.To address these developments, the proposals seek to ensure the EU's financial sector can adapt to the ongoing digital transformation and associated risks. They consist of two sets of measures:

1. Revision of the Payment Services Directive (PSD):

The current Payment Services Directive (PSD2) will be amended and modernized, becoming PSD3, and a Payment Services Regulation (PSR) will be established. These measures combat payment fraud by facilitating information sharing among payment service providers, increasing consumer awareness, strengthening authentication rules, and extending refund rights for fraud victims. They enhance consumer rights, improve transparency in account statements, provide clearer information on ATM charges, and promote a level playing field between banks and non-banks.

The proposals improve open banking by removing barriers and empowering customers to control their payment data. They also enhance the availability of cash and strengthen harmonization and enforcement.

2. Legislative proposal for a framework for Financial Data Access:

This proposal establishes rights and obligations for managing customer data sharing beyond payment accounts. It allows customers to securely share their data with financial institutions and fintech firms, enabling access to new, cost-effective financial products and services. Data holders are obliged to make customer data available, subject to permission, and customers have full control over data access. Standardization, liability regimes, and dispute resolution mechanisms are introduced to ensure data security and incentivize high-quality data interfaces. The proposal stimulates innovation, competition, and access to financial services for both consumers and small and medium-sized enterprises.

In practice, these proposals promote innovation in financial products and services, streamline processes, and increase competition. Consumers benefit from improved personal finance management and advice, while SMEs gain access to a wider range of financial services.

These proposals fulfill commitments outlined in the Commission's 2020 Retail Payments Strategy and the Digital Finance Strategy, supporting the development of instant payments and the establishment of a European financial data space. They align with the broader European data strategy and related initiatives, such as the Data Governance Act, Digital Markets Act, and Data Act proposal.

In conclusion, the European Commission's proposals aim to modernize the financial sector and enhance consumer protection and competition. By facilitating secure data sharing, these measures promote innovation, improve access to financial products and services, and prioritize consumer interests, security, and trust in the digital age.

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