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PSD3: The Next Phase in Europe’s Payment Services Regulation

With the successful rollout of PSD2, the European Union (EU) continues to advance innovation in the payments domain through the anticipated introduction of the   Payment Services Directive 3 (PSD3) . On June 28, 2023, the European Commission published a draft proposal for PSD3 and the   Payment Services Regulation (PSR) . The finalized versions of this directive and associated regulation are expected to be available by late 2024, although some predictions suggest a more likely timeline of Q2 or Q3 2025. Given that member states are typically granted an 18-month transition period, PSD3 is expected to come into effect sometime in 2026. Notably, the Commission has introduced a regulation (PSR) alongside the PSD3 directive, ensuring more harmonization across member states as regulations are immediately effective and do not require national implementation, unlike directives. PSD3 shares the same objectives as PSD2, i.e.   increasing competition in the payments landscape and enhancing consum
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Trade-offs Are Inevitable in Software Delivery - Remember the CAP Theorem

In the world of financial services, the integrity of data systems is fundamentally reliant on   non-functional requirements (NFRs)   such as reliability and security. Despite their importance, NFRs often receive secondary consideration during project scoping, typically being reduced to a generic checklist aimed more at compliance than at genuine functionality. Regrettably, these initial NFRs are seldom met after delivery, which does not usually prevent deployment to production due to the vague and unrealistic nature of the original specifications. This common scenario results in significant end-user frustration as the system does not perform as expected, often being less stable or slower than anticipated. This situation underscores the need for   better education on how to articulate and define NFRs , i.e. demanding only what is truly necessary and feasible within the given budget. Early and transparent discussions can lead to system architecture being tailored more closely to realisti
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From Transactions to Insights: The Journey of Bank Payment Data

It is often stated that ' Data is the new oil ', suggesting that data, like oil, holds immense value but remains unusable if unrefined. While this comparison simplifies, it effectively highlights two significant trends: A fierce   competition to capture as much customer data   as possible, waged not only by Big Tech and social media giants but also by major e-commerce players and supermarkets through loyalty programs. Growing investments in deriving insights from this accumulated raw data . The advancements in AI play a critical role, yet they merely scratch the surface. Beneath, substantial investments are required in tools to gather, cleanse, structure, and store data. The complexity and associated costs can be substantial. The   financial sector, rich in valuable data , has historically underutilized this asset for several reasons: Strict regulatory oversight   ensures data usage within the financial sector is heavily controlled. The sector’s   reliance on 'trust'  
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The Future of Banking: Beyond Products, Towards Experiences

  The financial industry is undergoing a significant transformation. Banks are evolving from mere repositories of money and providers of loans and investments into facilitators of our financial journeys and personal assistants in financial well-being. This shift marks the beginning of an   era characterized by embedded banking and deproductization . Traditionally, banking has focused on facilitating transactions, managing money, and mitigating risks. Our interactions with banks typically occur when we need to deposit or withdraw money, apply for a loan, or manage investments. Unfortunately, these interactions often feel disconnected from our everyday lives and objectives. Embedded banking   represents a paradigm shift in our engagement with banks. With this model, banking activities become seamlessly integrated into our daily routines, often without explicit engagement. For example, Buy Now, Pay Later (BNPL) services embed financing options directly into the online shopping experience,
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Safeguarding Finance: The Crucial Role of Sanction Screening

Financial crime   continues to be a major issue, undermining the trust and safety of global financial systems. The United Nations estimates that a staggering 2 to 5% of global GDP, or between EUR 715 billion and 1.87 trillion, is laundered each year. Moreover, about 50% of companies worldwide have experienced fraud in the last two years, underscoring the urgent need for effective measures against financial wrongdoing. Financial crimes fall into three main categories:   money laundering, financial fraud, and sanctions evasion , each with its own implications. However, sanctions evasion stands out for its direct threat to global economic stability and security. Sanctions   are punitive measures imposed on entities or individuals to restrict their trade or financial transactions. Sanction evasion aims to bypass these restrictions, often through methods like using shell companies or exploiting legal loopholes, making detection and prevention challenging for financial institutions. Sanction
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The Fraud Puzzle: Assembling the Pieces of Payment Security

Following our previous blog ' Rethinking AML: A Call for Innovation and Efficiency ' ("https://bankloch.blogspot.com/2024/02/rethinking-aml-call-for-innovation-and.html"), where we navigated the complex world of AML and pinpointed three primary   categories of malicious financial activities : Money laundering : Transforming proceeds from illicit activities into seemingly legitimate funds. Sanction bypassing : Circumventing governmental sanctions. Payment Fraud : Exploiting stolen or fake payment details to illicitly acquire goods or funds. Focusing on Payment Fraud, we discern two principal categories:   insider (internal) fraud , conducted from inside an organization by its own staff, and   external fraud , perpetrated by outsiders like customers or suppliers. This blog delves into   external fraud within the financial sector , particularly the unauthorized extraction of customer funds. This subset of "Payment Fraud" can be further split-up in several types
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