EU Builds on PSD2 as Open Banking Enters Its Next Phase

Open banking allows licensed third-party providers to access account data or initiate payments with a customer’s consent, challenging banks’ traditional control over financial information. The European Union accelerated that shift through the revised Payment Services Directive, or PSD2, which entered into force on Jan. 12, 2016, and had a Jan. 13, 2018, national transposition deadline. The framework helped make bank APIs, account-information services and payment-initiation providers central to Europe’s digital-finance market.

Years of implementation have expanded fintech participation but also exposed inconsistent API performance, cumbersome authentication and uncertainty over fraud liability. The European Commission responded on June 28, 2023, by proposing PSD3 and a directly applicable Payment Services Regulation. The package is intended to strengthen fraud safeguards, improve open-banking access and give non-bank payment providers better access to payment systems, marking an effort to update the rules as Europe’s financial-data ecosystem matures.