
The European Union (EU) has recently introduced a new law for digital wallets, aimed at improving consumer protection and competition in the digital payments industry. The new regulation, known as the Payment Services Directive 2 (PSD2), went into effect in September 2019 and requires digital wallet providers to meet certain security and transparency standards. In this article, we’ll take a closer look at the new EU law for digital wallets, including what it means for consumers and businesses.
What is PSD2?
PSD2 is a new regulation that updates the original Payment Services Directive, which was introduced in 2007. The new regulation aims to promote innovation and competition in the digital payments industry, while also improving consumer protection and security.
Under PSD2, digital wallet providers are required to meet certain security and transparency standards, such as strong customer authentication (SCA) and open banking. SCA requires customers to provide two forms of authentication, such as a password and a fingerprint, to access their digital wallet account. Open banking allows customers to share their financial data with third-party providers, such as budgeting apps, to access personalized financial services.
What are the Benefits of PSD2 for Consumers?
PSD2 offers several benefits for consumers, including improved security and transparency in the digital payments industry. With the introduction of SCA, consumers can be sure that their digital wallet accounts are protected against unauthorized access and fraud. Open banking also offers consumers more control over their financial data and the ability to access personalized financial services that can help them manage their money more effectively.
PSD2 also promotes competition in the digital payments industry, which can lead to lower fees and better services for consumers. Digital wallet providers must now compete on the basis of price, quality, and innovation, which can drive improvements in the industry and benefit consumers.

What are the Benefits of PSD2 for Businesses?
PSD2 also offers several benefits for businesses, particularly those that operate in the digital payments industry. With the introduction of open banking, businesses can access customer financial data and offer personalized financial services that can help them attract and retain customers.
PSD2 also promotes innovation in the digital payments industry, which can create new opportunities for businesses to develop and market new products and services. With the introduction of new players in the industry, businesses must also innovate to stay competitive, which can drive improvements in the industry and benefit businesses and consumers alike.
What are the Key Provisions of PSD2?
PSD2 includes several key provisions that digital wallet providers must comply with. These include:
- Strong customer authentication (SCA): Digital wallet providers must implement SCA to protect customer accounts against unauthorized access and fraud. SCA requires customers to provide two forms of authentication, such as a password and a fingerprint, to access their digital wallet account.
- Open banking: Digital wallet providers must allow customers to share their financial data with third-party providers, such as budgeting apps, to access personalized financial services.
- Transparency and disclosure: Digital wallet providers must disclose their fees and terms and conditions to customers in a clear and transparent manner.
- Complaints and redress: Digital wallet providers must have a complaints procedure in place and offer customers access to independent dispute resolution services.
What are the Challenges of PSD2?
PSD2 also presents several challenges for digital wallet providers and businesses in the digital payments industry. Compliance with the new regulation can be costly and time-consuming, particularly for smaller providers that may not have the resources to implement the necessary security and transparency measures.
PSD2 also creates new opportunities for competition in the digital payments industry, which can create challenges for established players that may face increased competition and pressure to innovate. However, this competition can also drive improvements in the industry and benefit consumers and businesses alike.
The new EU law for digital wallets, known as PSD2, represents an important step forward in promoting innovation, competition, and consumer protection in the digital payments industry. By requiring digital wallet providers to meet certain security and transparency standards, PSD2 offers improved security and transparency for consumers, as well as new opportunities for businesses to innovate and develop new products and services.
While compliance with the new regulation can be costly and time-consuming for digital wallet providers and businesses in the digital payments industry, the benefits of PSD2 are significant. With improved security and transparency, consumers can be sure that their digital wallet accounts are protected against unauthorized access and fraud. Open banking also offers consumers more control over their financial data and the ability to access personalized financial services.
PSD2 also promotes competition in the digital payments industry, which can drive improvements in the industry and benefit consumers and businesses alike. With the introduction of new players in the industry, businesses must innovate to stay competitive, which can lead to lower fees and better services for consumers.
In conclusion, the new EU law for digital wallets is an important development in the digital payments industry, offering improved security and transparency for consumers, as well as new opportunities for businesses to innovate and develop new products and services. As the industry continues to evolve, it’s important for digital wallet providers and businesses to stay up-to-date with the latest regulations and best practices to ensure compliance and provide the best possible services to consumers.