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With tensions over the EU’s payments legislation rising, critics warn that flaws in the Council’s position could have devastating consequences for fintech business models.
In a responding to the European Council’s adoption of its general approach on June 18, ETPPA voiced concerns that several “existential issues” affecting account information services (AIS) and payment initiation services (PIS) were excluded from the Council’s negotiating mandate.
The trade association called on EU lawmakers to reconsider open banking provisions in the forthcoming Payment Services Regulation (PSR) and the revised Payment Services Directive (PSD3).
It argued that the European Council’s current position fails to support competition and could hinder efforts to combat online fraud.
"Both the Council and Parliament positions have moved in the wrong direction when it comes to open banking, just in different ways,” said Ralf Ohlhausen, chair of the ETPPA.
He explained that the European Parliament, led by the then Polish rapporteur Marek Belka, “watered down” the Commission’s original intent to strengthen third-party providers, and that “the Council has taken it even further backwards under the Belgian presidency, which is frightening.”
ETPPA, whose members include Klarna, Wise, and Tink, is now urging the European Parliament and the Council of the EU to address these omissions during trilogue negotiations.
It warns that without key revisions, third-party providers will continue to face barriers that prevent them from competing fairly with banks and other payment service providers (PSPs).
“At this point, we’ve given up on improving the Commission proposal. Now we’re just trying to prevent it from getting worse,” said Ohlhausen.
Areas of focus
Ohlhausen said that the association “started with 24 constructive suggestions for how to amend the Commission’s proposal”, but is now focusing its efforts on just three key policies:
- Restore the European Commission’s original Article 38 on contingency measures for when dedicated interfaces are unavailable to prevent outages or poor API performance from disrupting open banking services.
- Reinstate the Commission’s definition of PIS in Article 3(20), on the grounds that the Council’s amended wording is unnecessarily restrictive and damaging to innovation in business models and use cases.
- Ensure high-quality open banking APIs by reverting to the Commission’s version of Article 36 and incorporating key improvements proposed by the European Parliament.
Ohlhausen warned that these are "existential" issues for the industry.
“We’ve spent the past 18 months trying to raise the alarm on these, because they fundamentally undermine the viability of open banking in the EU. These issues must be addressed in the trilogues.”
Battling fraud
ETPPA also opposes the Council’s proposed cuts to the list of prohibited obstacles in Article 44, arguing that this would undermine fair competition and weaken protections against fraud.
The trade association warned that open banking is not just a tool for competition but a crucial asset in the EU’s fight against online fraud, providing real-time, secure payment mechanisms that bypass legacy systems vulnerable to abuse.
It said that these issues “must be addressed during trilogue negotiations as an absolute minimum in order to put in place a level playing field for online payments in the EU and help in the fight against fraud.”
