With PSD2, the EU bureaucrats set out to promote “competition” among banks. Of course, you had to be sceptical from the start when bureaucrats talk about “competition”! 

But everyone went along with “open banking” & Co. In retrospect, not much remained and nothing useful ever came of it. In a meeting of the EU Commission the realization was actually revealed and PSD2 was actually called a “non-starter“. 

So now PSD3 / PSR is on its way (without clearing away the wreckage of PSD2). Should we expect anything meaningful? A short summary of the essentials: 

LIABILITY 

Many things were discussed in the committees. We don’t even want to mention some of the ideas that came up. It would be a waste of time. 

What remains, as always, is a bizarre transfer of liability from the bank customer to the banks. The bureaucrats often argue that liability should be where it can be insured! 

But nobody insures gross negligence, not even a bank. The EU bureaucrats have probably never heard of that! 

SEPA INSTANT PAYMENT 

We all knew this would become a “must” at some point. So here it is. Was it necessary? 

A resounding “no”. The annual growth of instant payments has been respectable, and there is actually a reasonable level of penetration. 

Now even specialist banks, whose customers do not benefit at all, have to provide 24/7 availability for payments and account management. 

The price of the SEPA Inst. must not be higher than the price of a standard SEPA credit transfer. This means that the SEPA Inst. does not have to be free of charge! This is often claimed. 

With all the “old stuff”, they were not too shy to have the availability of instant payment available to the customer. This means that the paper transfer forms must now also have a checkbox for instant execution. 

VERIFICATION OF PAYEE (VOP) 

This is what the official EPC Rulebook now calls the comparison of IBAN and account holder name. We already had this in the German DTA procedure in the past. There, however, the recipient bank had to check and, if necessary, be liable. No bank then checked small amounts (the damage caused by liability was less than the cost of the check). 

There are no figures on the number of cases of fraud or damage caused by transfers to an unknown (false) account holder per year. However, this question has never been asked by the committees of the EU Commission. It is enough for the bureaucrats if there is a chance that ONE EURO of damage is avoided. They are not interested in the total economic cost to the banks in the billions. 

The EU bureaucrats are now passing the buck to the sender’s bank! Unfortunately, of course, they do not know the name of the account holder of the destination account. But the EU bureaucrats are not interested (see liability above). 

So now comes a procedure that requires prior communication between the sending bank and the receiving bank. What does the world cost (if you are not allowed to waste taxpayers’ money)? 

The verification has to be done for normal SEPA CT transfers as well as for SEAP inst. There is no specification on how to match the name in the payment with the account holder. 

So have fun entering a payment to Greece. Please enter the name of the recipient in Greek letters! The damage/costs caused by this regulation will definitely be higher than the cases of fraud that will be prevented. 

In terms of practical implementation, it is becoming clear that the central clearers will enable communication. Preparations are already underway at TIPS, and EBA Clearing will also offer it to RT1 clients. 

Many other vendors are also getting started. They are trying to provide reconciliation through central repositories and communication with each bank through APIs. 

TIME FRAME: NEXT STEPS 

The EPC aims to deliver the following by the end of September 2024 

1. the official version 1.0 of the VoP Rulebook,
2. the associated VoP schema, Inter-PSP and API specifications, and
3. the EPC recommendations for reconciliation processes within the VoP Schema framework.