GlossaryTerm · Open Banking

What does PSD2 mean?

By Tokenova Editorial Desk

The EU law behind open banking and the extra security step when you pay online.

5 sources ↓
Euro coins piled on a blue flag with yellow stars
Photo: “Euro coins (08)” by Lukasz Kobus - European Commission, CC BY 4.0 (edited: cropped, colour-graded)

Quick answer

PSD2 is the European Union's second Payment Services Directive, applying since 13 January 2018. It regulates payment initiation and account information services, requires strong customer authentication, and cuts a consumer's maximum loss on unauthorised payments to €50 in most cases⁠[2]⁠[1].

Key points

  • PSD2 = second Payment Services Directive, an EU law applying since 13 January 2018.
  • It is the legal basis for open banking in the EU.
  • It made strong customer authentication standard and lowered the consumer liability cap from €150 to €50.
On this page
  1. What does PSD2 stand for?
  2. What did PSD2 change?
  3. Is PSD2 being replaced?
  4. FAQ
  5. Sources

#What does PSD2 stand for?

PSD2 stands for the second Payment Services Directive. A directive is an EU law that member countries copy into national law. PSD2 updated the first directive of 2007⁠[1] and has applied since 13 January 2018⁠[2]. It covers banks, payment institutions and the newer providers that connect to bank accounts.

#What did PSD2 change?

  • Open banking: it regulated payment initiation and account information services, so apps can connect to your account with your consent⁠[1]. See open banking.
  • Strong customer authentication: identity checks using at least two of something you know, own or are⁠[2]. See SCA.
  • Lower liability: the most a consumer normally pays for an unauthorised payment fell from €150 to €50⁠[1].
  • No card surcharges for about 95% of card payments in the EU⁠[1].

Worked example

Example

Your card is stolen and used for a €400 online purchase before you report it. If you did not act fraudulently or with gross negligence, PSD2 limits your loss to €50, so your provider refunds €350 (calculated with code)⁠[1]. In the UK, which kept similar rules in its Payment Services Regulations 2017, the cap is £35⁠[3].

#Is PSD2 being replaced?

Yes, eventually. The Council and European Parliament reached a provisional agreement on PSD3 and a Payment Services Regulation on 27 November 2025⁠[4]. As of 3 October 2026, the European Parliament listed the files as awaiting the Council's position, with an indicative plenary date of 14 December 2026, so formal adoption and publication were still pending⁠[5]. For the full story, read PSD2 explained and what is open banking.

Frequently asked questions

Does PSD2 apply in the UK?

The UK has its own Payment Services Regulations 2017 with similar rules, such as a £35 liability cap instead of €50⁠[3].

Why does my bank ask for a code when I shop online?

That is strong customer authentication, which PSD2 made the norm for many electronic payments⁠[2].

Sources

  1. Payment Services Directive: frequently asked questions (MEMO/15/5793, version dated 12 January 2018) — European Commission, 2018 Primary
  2. Payment Services Directive (PSD2): Regulatory Technical Standards (RTS) enabling consumers to benefit from safer and more innovative electronic payments (MEMO/17/4961) — European Commission, 2017 Primary
  3. The Payment Services Regulations 2017, regulation 77 (Payer's liability for unauthorised payment transactions) — legislation.gov.uk, 2017 Primary
  4. Payment services: Council and Parliament agree to step up the fight against fraud and increase transparency — Council of the European Union, 2025 Primary
  5. Procedure file 2023/0210(COD): Payment services in the internal market (Payment Services Regulation) — European Parliament Legislative Observatory, 2026 Primary

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