Retailers, financial institutions, and payment method providers alike are directly affected by the European Payment Services Regulation (PSR). This new law will change the way payments are made within the European Union. We explain what the PSR is, what it says, what it aims to accomplish, how it’s applied, and how it impacts businesses.

Key takeaways

• The PSR is a European regulation addressing the obligations of financial institutions and online businesses operating within the EU.
  
• It’s a supplement to the Third Payment Services Directive (PSD3).
  
• The purpose of the PSR is to standardise payment rules in the EU to enforce consistency across member states and ensure user protection.
  
• The PSR contains new rules to increase security in the payment landscape, facilitate open banking, and protect users.
  
• As a regulation, it applies directly in all member states, without transposition into national law. It’s scheduled to take effect in 2027.
  

What is the PSR?

The PSR is a set of rules introduced by the European Commission that governs payment services and payment method providers in the EU. It forms part of the same legislative package as the PSD3 and maintains consistent standards throughout all EU member states.

Together, the two laws aim to address the shortcomings of the PSD2, the previous directive, and establish a secure, unified, competitive European payment market.

What’s the difference between the PSR and the PSD3?

The PSR is a European regulation, while the PSD3 is a directive. Unlike directives, which each member state must transpose into its own laws, the PSR is applicable directly and uniformly throughout the EU. Its adoption will standardise the application of payment rules, preventing different interpretations across countries. Conversely, directives allow member states more flexibility in interpreting their provisions.

The PSD3 addresses payment architecture. It focuses on the certification, authorisation, and supervision of payment method providers within the EU, including how they operate, the requirements that apply, and the level of oversight needed. The PSR lays out the daily operational standards that support compliance with the directive. It addresses user rights, security, open banking, and transparency.

What is the PSR’s purpose?

The PSR’s purpose is to harmonise payment rules throughout the EU to improve security, protect users, and create a safer, more competitive market for both customers and businesses.

Its objectives include the following:

• Modernise and secure payment services to help prevent fraud
  
• Strengthen transparency and user protections and ensure equitable treatment for all
  
• Remove obstacles to open banking
  
• Simplify the user experience
  
• Encourage competition and innovation in the payment services market
  
• Establish a framework prepared to handle technological advances and new threats
  

What information is in the PSR?

The regulation includes several major provisions that strengthen the payment services ecosystem. These include the following:

• Two-factor authentication: The PSR requires Strong Customer Authentication (SCA) for most electronic transactions (with exceptions for small amounts and low-risk transactions), to reduce fraud and enhance security.
  
• Recipient verification: It requires mandatory recipient verification—an exact match between the International Bank Account Number (IBAN) and the recipient’s name—before transfers can be completed. The regulation also encourages payment service providers to share information about fraudulent data, such as unauthorised IBANs.
  
• Bank APIs: The PSR creates stricter rules for bank application programming interfaces (APIs). Banks will have to offer payment service providers efficient, dedicated interfaces to enable open banking and facilitate the exchange of secure banking information.
  
• User rights: The regulation clarifies user rights regarding transparency and refunds. If a transaction is not customer-authorised (e.g., identity theft, fraud, or usage-based billing), the payment services provider must refund the entire amount. The provider must also inform customers of all transaction fees and exchange rates.
  

How is the PSR applied?

Once adopted, the PSR will apply uniformly to all payment service entities in the EU, including banks, businesses, and payment services providers (as well as e-money institutions and digital wallet or cryptocurrency providers).

Because it has left the EU, the United Kingdom is not subject to the regulation’s requirements. The British regulator, the Payment Systems Regulator (also abbreviated as PSR), will determine its own standards. Enterprises operating in both the EU and the UK must follow two separate sets of regulations.

When will the PSR take effect?

The PSR and PSD3 are currently being finalised. They are scheduled to be officially adopted in 2026 and take effect in 2027. Businesses need to begin preparing now to support a smooth transition.

How Stripe Connect can help you

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Connect can help you:

• Launch in weeks: Use Stripe-hosted or embedded functionality to go live faster and avoid the up-front costs and development time usually required for payment facilitation.

• Manage payments at scale: Use tooling and services from Stripe so you don't have to dedicate extra resources to margin reporting, tax forms, risk, global payment methods or onboarding compliance.

• Grow globally: Help your users reach more customers worldwide with local payment methods and the ability to easily calculate sales tax, VAT and GST.

• Build new lines of revenue: Optimise payment revenue by collecting fees on each transaction. Monetise Stripe's capabilities by enabling in-person payments, instant payouts, sales tax collection, financing, expense cards and more on your platform.

Learn more about Stripe Connect or get started today.