What is Payment Services Directive?
The EU’s Payment Services Directive (PSD, now PSD2 with PSD3 inbound) changed payments – and the way banks work with them – by opening up banking to licensed third parties, and mandating strong customer authentication (SCA) for many e-payments. PSD2 increased the emphasis on APIs, defined liability and nudged the market toward both safer and more competitive rails.
What this means in product: Apply SCA or a valid exemption; store evidence for audit; and design payment journeys that don’t bulldoze the user experience. Merchants can shift liability if they provide compliant SCA flows; issuers must weigh approval rates and convenience with effective risk controls. Open‑banking data can supercharge risk models – if handled with care.
