EU clamps down on online fraud and hidden fees affecting online payment platforms

• PSPs in the EU will be liable for customer losses if they don’t have sufficient safeguards in place
• Sending PSPs must verify account details, receiving PSPs must freeze suspicious payments
• The EU is also calling for greater fee transparency and access to cash

The European Parliament and Council have reached an agreement on the Payment Services Regulation (PSR) and the Third Payment Services Directive (PSD3), with the aim of both protecting customers against losses and improving access to banking services and cash.

Under the new rules, payment service providers (PSPs) will be liable for customer losses if they fail to implement adequate fraud-prevention measures.

This includes making mandatory checks to ensure the payee name matches the account identifier; mismatches must lead to rejected payments to prevent losses in the first instance.

The EU wants banks to boost fraud prevention

PSPs are also required to offer strong customer authentication, while spending limits and blocking tools must be available to users.

On the flip side, recipient PSPs must freeze suspicious transactions to stop funds from being deposited into a dodgy account.

PSPs must also fully refund losses caused by impersonation fraud if the victim customer reports it to the police and informs their bank.

“Today’s deal is a win for the Parliament by establishing a liability provision for online platforms where fraud started,” regulation rapporteur René Repasi noted.

But it’s not all about fraud prevention, because the EU is also calling for greater transparency around fees. For example, all charges, including currency converstions and ATM fees, must be disclosed before payment is taken.

The European Union also wants to improve access to cash in an increasingly digitized world, offering retail stores permission to process cash withdrawals of €100-€150 without requiring a purchase.

Further strengthening competition in this market, the EU is calling for reduced barriers for open banking, while clear user dashboards to manage data access permissions puts more control in customers’ hands.

“This deal is a significant step toward a more open and resilient single market for payments,” directive rapporteur Morten Løkkegaard explained, adding that “cash remains a genuine and convenient payment option.”

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