On Thursday 15th October the European Parliament overwhelmingly voted through the Payment Services Directive 2 (PSD2), which will clarify certain elements of the existing PSD and may well enable ensure innovation in the e-commerce market.

One of the key issues that PSD2 updates is the ability for the European Banking Authority to issue common and secure standards of the authentication and availability of funds in e-commerce transactions. In theory this should stimulate e-commerce trade across borders within the EU.

A weakness is that the new legislation could increase bureaucracy and discourage trade by frightening off customers who have to go through complex and difficult payment processes. Arranging a front end process to minimise the complexity will be key to ensuring simpler and easier yet better assured cross border e-commerce trade.

The legislation must now pass through the Council of Europe, be endorsed by the European Parliament, and then the European Banking Authority will launch a public consultation before the legislation passes through Member States’ legislatures.