The European Parliament has adopted the revised Directive on Payment Services (PSD2) proposed by the European Commission for enhanced consumer protection and improved security of electronic payment services.
The updated EU payment service rules would cut the cost of paying bills and allows authorized third party to make payments on a client's behalf by using mobile and online tools.
The PSD2 introduces stringent security requirements for the initiation and processing of electronic payments and the protection of consumers' financial data.
The new rules also allow payment initiation services providers and account information services providers to enter the EU payment market.
These facilitate the prohibition of surcharging during online and retail payments, in addition to reducing the liability for non-authorized payments and an unconditional refund right for direct debits in euro.
European Parliament Member Antonio Tajani said: "The EU payment services market remains fragmented and expensive, costing €130 billion, or over 1% of EU GDP, a year. The EU economy cannot afford these costs, if it wants to be globally competitive.
"The new regulatory framework will reduce costs, improve the security of payments and facilitate the emergence of new players and innovative new mobile and internet payment methods".
The directive will be formally adopted by the EU Council of Ministers after the Parliament's vote.
European Commission Commissioner Margrethe Vestager said: "We have already used EU competition rules to ensure that new and innovative players can compete for digital payment services alongside banks and other traditional providers.
"Today's vote by the Parliament builds on this by providing a legislative framework to facilitate the entry of such new players and ensure they provide secure and efficient payment services.
"The new Directive will greatly benefit European consumers by making it easier to shop online and enabling new services to enter the market to manage their bank accounts, for example to keep track of their spending on different accounts".
Image: Opening up the online payments market will encourage innovators to offer cheaper, safer, payment tools. Photo: courtesy of AP Images/ European Union-EP.