PSD2 SEPA (Single Euro Payments Area) is responsible for enabling consumers to make digital payments in Euros to a European Union (EU) member country and many non-EU countries. This can be done in any digital transaction using Wire Transfer or Direct Debit. PSD2 SEPA cross-border payments are extremely secure and as efficient as domestic payments.
ContentsThe purpose of PSD2 SEPAThe legal backbone of SEPAThe effect of SEPA on paymentsThe correlation between PSD2 SEPA and GDPRSEPA as a concept was first introduced in 2008, followed by direct debits the following year and it was finally implemented in 2014 in the Eurozone and in 2016 in non-Eurozone SEPA countries. /P>
The PSD2 SEPA was created as an innovative solution for the development of payment infrastructures. Its main objective is to change the modes of currency transfer within the EU while increasing efficiency and creating a union in a federated financial network.
The European Union has created three separate regulations (PSD2, SEPA and Global Data Protection Regulation (GDPR)) which overlap and create a secure and harmonized payment transaction environment. They protect personally identifiable information (PII) helping financial institutions and third-party payment providers (TPPs) manage payment card data while eliminating opportunities for fraudulent activity.
SEPA has triggered increased payment efficiency and competition within the European Union. It eliminated borders by introducing the euro in member countries, therefore, cross-border payments became the same as national ones. Additionally, it standardized payment processes and regulations that created equal rights and requirements for the parties involved.
The SEPA legal framework has been developed on the basis of the Payment Services Directive (PSD/PSD2), the SEPA Migration End Date Regulation and the Interchange Fee Regulation.
DSP2 SEPA has been supported by many public authorities and brought to light in a union. The European banking industry has driven the need for SEPA and EU members, together with the European Commission and the Eurosystem, have supported further implementation.
As of October 30, 2020, SEPA was made up of 36 European members as well as many countries that are neither members of the EU nor of the eurozone.
With the emergence of SEPA, the monetary movement experienced an incredible shift and suddenly kicked into high gear. This has affected how money transfers work between businesses, the general public and the financial sector.
Two main types of instruments have been set up with SEPA:cash and derivatives. International accounting standards (IAS 32 and 39) define an instrument as “any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity”.
Cash instrument includes payments, loans, deposits and securities that execute a previously agreed transaction between sender and receiver. The derivative instrument consists of a value that comes from the basic unit – assets, interest rates or indices.
SEPA regulations have made real-time transactions possible with immediate results. Because of this framework, all payments must be available 24/7 and transferred instantly. The transfer is irreversible and happens instantly with an abrupt message informing about the success or failure of said transaction.
SEPA is the legislation relating to sensitive payment information, PSD2 is a framework which strengthens payment legislation and GDPR is a regulation which obliges businesses and financial institutions to protect sensitive consumer data within the EU. /P>
However, on closer inspection, PSD2 was created to open sensitive data to third parties to make money transfers and payments more efficient. The GDPR, on the other hand, was developed to protect this information and make it private. So it seems like these are two conflicting regulations that companies should implement. In reality, this is not true, as they are both here to ensure that data privacy remains secure while using it to improve services. Therefore, if a company handles sensitive information inappropriately, it will face serious consequences.
