Written by Modulr | Jul 24, 2025 11:00:00 PM
PSD2 (Payment Services Directive 2) is a European Union regulation that aims to increase competition and security in the payments industry. It mandates Strong Customer Authentication (SCA) and enables Open Banking. An extension and updating of EU instant payments regulation – PSD3 – is expected to be announced across Europe in 2025. The European Unions' second Payment Services Directive (PSD2) is broadly in alignment with the UK’s Open Banking regulation and has been a key element in building a digital single market for the continent. There is significant overlap with Open Banking in how the package of regulations is designed to make it easier both for consumers to access their own data and for businesses to access it on their behalf. There are also provisions around stronger identity authentication to decrease fraud in digital transactions, and overall PSD2 is part of a wider narrative of increased competition and transparency arising from the digitisation of banking.