PSD3: The Complete Guide to the EU’s New Payment Services Directive

The European payments landscape is changing again. With PSD3 on the horizon, businesses, banks, fintechs, and consumers are preparing for another major shift in how payments work across the EU. While PSD2 laid the foundation for open banking, PSD3 aims to fix its weaknesses, strengthen trust, and support innovation in a rapidly evolving digital economy.

This guide explains PSD3 in clear, practical terms. You will learn what PSD3 is, why it was introduced, how it differs from PSD2, and what it means in real life for payment providers and users.

Table of Contents

What Is PSD3?

PSD3, or the Third Payment Services Directive, is the European Union’s upcoming regulation designed to modernize and strengthen the rules governing payment services. It builds on PSD2 and works alongside a new Payment Services Regulation to create a more consistent and secure payments framework across EU member states.

The main goal of PSD3 is to improve consumer protection, increase competition, reduce fraud, and remove inconsistencies that emerged during PSD2 implementation. By doing so, the EU wants to support safer digital payments while encouraging innovation.

PSD3 applies to a wide range of players, including banks, electronic money institutions, payment institutions, fintech companies, and other regulated payment service providers.

Why the EU Introduced PSD3

PSD2 delivered major benefits, such as open banking and stronger authentication. However, it also revealed practical issues that affected both businesses and consumers. Different interpretations across countries led to uneven rules, while fraud levels continued to rise in certain payment channels.

PSD3 was introduced to address these challenges and to reflect how payments are actually used today. Digital wallets, instant payments, and embedded finance are now common, and the regulatory framework needed an update to keep pace.

Key drivers behind include:

Rising payment fraud and social engineering scams
Inconsistent application of rules across member states
Limited access to payment accounts for some providers
The need for clearer rules around open banking and data access

PSD3 vs PSD2:

PSD3 does not replace PSD2 overnight. Instead, it refines and strengthens the existing framework while working together with a directly applicable regulation. This approach reduces legal uncertainty and improves harmonization across the EU.

Stronger Consumer Protection

PSD3 places a greater focus on protecting users from fraud, especially authorized push payment scams. Under the new rules, liability is more clearly defined, and providers must take stronger preventive measures.

Consumers will benefit from:

Improved refund rights in certain fraud cases
Clearer information about payment services and fees
Stronger safeguards against impersonation scams

Better Fraud Prevention

Fraud remains one of the biggest pain points in digital payments. PSD3 enhances fraud monitoring obligations and promotes better cooperation between payment service providers.

Examples of improvements include:

Enhanced transaction monitoring standards
Stronger identity verification processes
Shared responsibility among providers involved in a payment

These changes aim to reduce losses while maintaining smooth user experiences.

Improved Access to Payment Systems

One of the most important changes under is fairer access to payment accounts and systems. Non-bank payment institutions and electronic money institutions have faced barriers under PSD2.

improves this by:

Clarifying access rights to payment accounts
Reducing unjustified refusals by banks
Supporting competition and innovation

This creates a more level playing field for fintech companies and new market entrants.

PSD3 and Open Banking

Open banking remains a central pillar of the EU payments strategy. Strengthens the rules around data access to ensure reliability and fairness for all parties involved.

More Reliable APIs

Under PSD2, API performance varied widely. Introduces clearer requirements to improve availability, performance, and consistency.

This benefits:

Fintechs that rely on stable access
Banks that want clear technical standards
Consumers who expect seamless digital services

Clearer Data Access Rules

PSD3 clarifies what data can be accessed, how consent works, and how long access should be granted. This reduces disputes and improves trust between banks and third-party providers.

How PSD3 Affects Banks

Banks will need to adapt their systems, processes, and risk management frameworks to comply with PSD3. While this requires investment, it also brings opportunities to improve efficiency and customer trust.

Key impacts on banks include:

Stronger fraud prevention obligations
Clearer responsibilities when working with third-party providers
Improved operational resilience requirements

Banks that proactively prepare for can strengthen their position in a competitive market.

How PSD3 Impacts Fintech and Payment Providers

For fintech companies and payment institutions, PSD3 is largely positive. It addresses long-standing issues related to access and regulatory clarity.

Benefits include:

Fairer access to payment accounts
Reduced legal uncertainty across EU countries
Clearer licensing and supervision rules

At the same time, fintechs must invest in compliance, fraud monitoring, and governance to meet higher regulatory standards.

Real-Life Example:

Consider a consumer who falls victim to a payment scam through social engineering. Under earlier rules, refunds were often unclear, and liability disputes could drag on.

With PSD3:

Providers must have stronger fraud detection systems
Liability rules are clearer, improving refund outcomes
Consumers receive better information before authorizing payments

This creates a safer environment without blocking legitimate transactions.

PSD3 and Cross-Border Payments

Cross-border payments remain a priority for the EU. Supports smoother transactions by reducing fragmentation and aligning rules across member states.

Businesses operating in multiple countries benefit from:

Consistent regulatory requirements
Reduced compliance complexity
More predictable customer experiences

This is especially valuable for e-commerce platforms and international service providers.

Compliance Timeline and Preparation

PSD3 is expected to apply after a transition period, giving organizations time to prepare. Early planning is essential to avoid last-minute compliance risks.

Preparation steps include:

Reviewing fraud prevention and risk frameworks
Assessing API performance and data access processes
Training staff on updated regulatory requirements

Organizations that act early can turn compliance into a competitive advantage.

The Role of Trust and E-E-A-T

Trust is at the heart. By improving transparency, accountability, and security, the directive aligns with principles of experience, expertise, authoritativeness, and trustworthiness.

For businesses, this means:

Clear communication with users
Responsible handling of payment data
Demonstrable commitment to security and compliance

These factors directly influence customer confidence and long-term growth.

Challenges and Criticism

While PSD3 brings many benefits, it also presents challenges. Some providers worry about increased compliance costs and operational complexity.

Common concerns include:

Investment required for fraud prevention tools
Adapting legacy systems
Managing shared liability models

However, these challenges are balanced by long-term gains in trust and efficiency.

The Future of Payments Under

PSD3 is part of a broader vision for a digital, competitive, and secure EU payments market. Combined with instant payments and digital identity initiatives, it supports innovation while protecting users.

Over time, PSD3 is expected to:

Reduce payment fraud
Encourage new financial products
Improve consumer confidence in digital payments

This makes it a cornerstone of the EU’s financial strategy.

Conclusion:

PSD3 is more than a regulatory update. It is a strategic move to strengthen trust, fairness, and innovation in the European payments ecosystem. By addressing the gaps left, it creates clearer rules for providers and safer experiences for users.

Whether you are a bank, fintech, merchant, or consumer, understanding PSD3 is essential. Preparing early will help you stay compliant, reduce risk, and take advantage of new opportunities in the evolving payments landscape.

Now is the time to assess your readiness and align your payment strategy with the future of EU regulation.