The EU Payment Services Directive (PSD) will have a significant effect on corporate banks and business banking customers according to new research from TowerGroup.
The PSD will considerably alter legal and client contractual relationships between these two parties.
The TowerGroup research explains that the PSD will have wider ranging and more substantial effects than other elements of the Single Euro Payments Area (SEPA), requiring even greater spend on compliance. Despite this, TowerGroup reports that banks are only just waking up to the impact PSD will have on their operations, especially in regards to corporate banking. Very few businesses and corporations are even aware of the new directive and its implications.
“It is imperative that banks be prepared to renegotiate contracts with all corporate and business clients. The impact of PSD is set to be far ranging and we are concerned about the lack of awareness from both banks and the customers who will be affected,” says Susan Feinberg, research director, Wholesale Banking.
The PSD is a legal foundation for the creation of an EU-wide single market for payments. When a business or corporate client chooses to use a bank for payments services, there are a number of legal agreements and protections agreed as part of this service. Under the PSD, many of these will change or be redefined.
TowerGroup anticipates:
Sophisticated corporate organisations will seek to leverage PSD to negotiate improved service levels with their banks.
Successful banks will advise their clients thorough all aspects of PSD, not only the bank-client contractual relationship.
Banks will have to bear the substantial cost of putting these changes into practice.
Some articles under the PSD are compulsory; others may be selectively adopted or negotiated country-by-country. Therefore, it will not be apparent until the end of the whole negotiation process to what extent the market is homogenous or not.
European Union countries will have until November 2009 to put these new practices and legal procedures in to place and to lay down the guidelines for waivers or modifications. Only when all countries have finally implemented their set of agreed articles will it be clear how homogeneous the market is.
The PSD will affect all banking customers, corporate or consumer, in the following areas:
Liability in cases of loss, theft and misappropriation.
Unauthorised payments refund procedures.
Charge deduction by payment service providers.
Credit transfers and execution timeframes.
Value dating.
The full list of provisions that can be waived or negotiated between banks and corporate or business clients are:
Transparency of conditions and information requirements for payment services, including charges rates and execution time.
Notification by the payer of an unauthorised or erroneous payment.
Burden of proof of transaction.
Payer liability costs.
Payer entitlements to refunds.
Refund or refund refusal timeframes for payment service providers.
Liability in cases of unexecuted or defective execution by the payment service provider.