PSD2, the second Payment Services Directive, is the EU law that rewired European payments. It made Strong Customer Authentication mandatory for most online transactions, forced banks to open account access to licensed third parties, the foundation of open banking, and set the licensing regime for payment institutions across the EEA.
Why it matters
For merchants selling into Europe, PSD2 is why 3D Secure is unavoidable on EU cards, and its exemptions are the levers that protect conversion: low value transactions, transaction risk analysis and, above all, merchant initiated transactions, the framework that lets continuity billing charge stored cards without challenging the customer every cycle. Getting recurring payments correctly flagged as merchant initiated is one of the highest value fixes available to a subscription business. A successor package, PSD3, is already moving through Brussels.