Luxembourg: towards an industry friendly implementation of PSD2?

The bill implementing PSD2 in Luxembourg was filed with Parliament on 10 October 2017. Although faced with the prospect of future amendments to the e-money institution regime, the Luxembourg government has decided to maintain its current approach of having one law governing both payment services and e-money institutions. It is therefore proposing to fully amend the Luxembourg law dated 10 November 2009 on payment services and e-money institutions to implement the relevant amendments and innovations introduced by PSD2.

Mainly PSD2 copy-out…

For the most part the bill is a copy-out of PSD2, ensuring that the Luxembourg position will be in line with the European Commission's original proposals on the further harmonisation of the payment services sector.


…but with some tailoring

The Luxembourg government has only chosen to take advantage of a limited number of the options provided under PSD2, such as:

  • The ability for the Luxembourg regulator (Commission de Surveillance du Secteur Financier) to choose not to apply the calculation of own funds provisions under PSD2 to payment institutions which are included in the consolidated supervision of the parent credit institution pursuant to Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms;
  • The possibility for the Luxembourg regulator to exempt natural or legal persons providing payment services other than payment initiation services and account information services from the application of all or part of the authorisation procedure and conditions where:

a) the monthly average of the preceding 12 months’ total value of payment transactions executed by the person concerned, including any agent for which it assumes full responsibility, does not exceed EUR 3 million; and

b) none of the natural persons responsible for the management or operation of the business has been convicted of offences relating to money laundering or terrorist financing or other financial crimes;

  • To double the thresholds applicable to national payment transactions and to increase the threshold up to EUR 500 with respect to prepaid instruments for transactions and instruments to be eligible for derogation from some provisions of PSD2 and to qualify as low-value payment instruments and electronic money;
  • To prohibit the payee from charging the payer for the use of a payment instrument;
  • To limit the liability of the payer's payment service provider for an unauthorised transaction when the latter does not have the ability to freeze the payment account on which the electronic money is stored or block the payment instrument.


Industry friendly v user friendly

In the implementation bill, the Luxembourg government seems to have chosen a more industry friendly approach, disregarding the possibility of providing microenterprises with user protections similar to those available to consumers or of allowing non-consumers to benefit from alternative dispute resolution procedures.  It is expected that the bill will now be thoroughly reviewed and discussed by the Parliament as well as commented on by a certain number of appropriate commissions, so the final version could well be more user friendly.


A step towards Luxembourg's digital future?

An industry friendly approach to the implementation of PSD2 in Luxembourg would, however, follow the Luxembourg government's and regulator's joint effort to make the digital society, especially Fintech and ICT innovations, the future of Luxembourg.

Over the last two years, the Luxembourg government and the Luxembourg regulator have in particular led initiatives like the LHOFT (Luxembourg House of FinTech), developed and sponsored public and private ICT initiatives, and also promoted communication between regulators, professionals within the industry sector and payment services users via the creation of a Chair in Digital Financial Services in collaboration with PayPal.

It remains to be seen whether the common governmental and regulatory approach on the importance of the digital society will be reflected in the final PSD2 implementation law as well as in the further guidance that the Luxembourg regulator will be publishing on the interpretation of the implementation framework.


What's next?

The bill will now be considered, commented on and approved by Parliament.  The Luxembourg regulator (Commission de Surveillance du Secteur Financier) currently expects implementation to be completed before the January 2018 deadline and, if so, will require in-scope entities to comply with PSD2 requirements from the 13 January implementation deadline.

Take a look at our PSD2 National Implementation Status Table for information on the current status of PSD2 implementation in other key European jurisdictions.

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