By cardaccept August 12, 2025
As payment regulations globally change, U.S. merchants are required to adapt to new updates such as PSD3 and other global standards. The new regulations are designed to increase security, better protect customers, and simplify cross-border payments.
U.S. companies venturing abroad will be required to shift to increased compliance standards, protection of customer data, and changing payment technologies in order to remain competitive and not incur fines. Familiarity with these regulations is vital for seamless global operations.
Payment Services Regulation for Platforms under PSD3
Within the PSD (Payment Services Directive) system, platforms are required to obtain a license in order to provide regulated payment services.
But there was one loophole, the “commercial agent exemption,” under which platforms did not need to do this as long as they acted on behalf of only one party, either the payee or the payer. PSD2 further tightened this provision to restrict the exemption only to instances where the platform does not hold or control money.
The new PSD3 changes are going to make this exemption tighter. Next, platforms operating on behalf of both buyers and sellers will require a license unless they are using a regulated payment service provider.
PSD3 also adds more stringent conditions under which platforms must demonstrate that they are actually negotiating on behalf of one party and giving them a significant margin. If you’re a platform claiming this exemption, it’s important to consider how the changes ahead will impact your business.
PSD3 and the Way Forward for Strong Customer Authentication (SCA)
Strong Customer Authentication (SCA) was brought in by PSD2 to secure online payments and minimize fraud. It mandates two-factor authentication in most transactions, and its success has been seen in minimizing fraud. The objective is to have high security with enhanced user experience and scope for innovation.
The new regulations make it clear how SCA should be used in various scenarios, including merchant-initiated transactions (MITs) and Mail Order Telephone Order (MOTO) transactions, and dynamic linking to electronic payments.
For account information services, SCA is required only on initial access to data, whereas tokenisation will need SCA when replacing a card. The European Banking Authority (EBA) is developing further guidance on SCA exemptions and issuing standards for risk analysis and transaction monitoring.
The revised rules will also enhance accessibility with alternative authentication methods and ensure that payment service providers (PSPs) implement measures to fight fraud. These reforms will help businesses maximize their SCA engines and maintain regulatory compliance with changing regulations.
PSD3's Effect on U.S. Merchants: Enhancing Payment Security
PSD3 is an extension of the Strong Customer Authentication (SCA) model under PSD2, with the purpose of providing a secure and convenient online payment process. For U.S. merchants who are processing customers in Europe, PSD3 introduces consistency in SCA adoption, making it easier with standardized APIs throughout the EU. The new regulations also simplify SCA exemptions, including raising the low-value transaction threshold, which minimizes customer friction.
PSD3 improves fraud defense by fighting new threats such as suspicious behavioral patterns and enables superior authentication techniques, such as multi-device and biometric authentication. The new developments not only enhance security but also enable U.S. merchants to provide smoother, more efficient transactions, particularly when processing international payments.
Whom Does PSD3 Affect?
PSD3 affects all the players in the payments world. On the consumer side, this translates to a safer and more seamless experience with enhanced fraud protection and biometric authentication, and fewer restrictions on low-risk transactions.
Merchants gain through clearer and more harmonized rules in Europe, facilitating streamlined cross-border payments and a smoother checkout experience for customers.
For banks and payment institutions, PSD3 makes compliance much more easier with standardized APIs and more robust fraud detection capabilities, eventually making the digital payments landscape safer and increasing trust in the system.
Major Updates to PSD3
PSD3 brings with it some major updates that seek to enhance payment security and protect consumers. It enhances consumer protection with more defined rules for the management of personal data, a requirement to perform account checks, and improved refund processes.
The directive also broadens Open Banking through improved APIs, better control for consumers over financial information, and stronger data sharing between banks and third parties. In order to enhance accessibility, PSD3 aims to simplify payments for vulnerable populations, including the elderly and disabled, by promoting user-friendly interfaces.
In addition, it seeks to harmonize payment security practices throughout the EU, providing consistency and enhanced penalties for noncompliance. Lastly, PSD3 also reinforces Strong Customer Authentication, where companies are obliged to exchange consumer information for accelerated payment approvals with an additional layer of fraud protection.
Global Payment Regulation Issues Facing U.S. Merchants
Cross-border payments accepted by U.S. merchants are met with numerous issues, such as adherence to international data privacy regulations, such as the PCI compliance or EU’s GDPR, which demand detailed data storage and processing requirements. Also, it is challenging to deal with proper, detailed licensing and registration processes in various jurisdictions, as different legal frameworks make it tough to resolve disputes.
Another issue is exchange risks of currency, especially since nations such as South Korea have strict regulations that force foreign companies to exchange currencies into another form before transfer.
How Digital Technologies Enhance Cross-Border Payments
Traditional cross-border payment systems were mostly complicated, expensive, and difficult to use. But all that is changing with new digital technologies, making it easier and more streamlined for merchants to conduct international transactions.
These newer solutions provide improved cost-effectiveness by accelerating payments and safeguarding merchants against currency fluctuations. For example, on some systems, cross-border payments can be settled between 3 and 20 minutes, bypassing the risks associated with lengthy settlement times, during which currency exchange rates could fluctuate.
Furthermore, APIs are also changing the nature of how currency exchange is executed within financial departments by offering up-to-the-minute FX rates, enhancing risk management, and accelerating processes such as reconciliation. With such capabilities, companies can negotiate against favorable FX rates and move funds more effectively, providing smoother experiences for merchants and customers alike.
Why Are Cross-Border Payments So Difficult?
Cross-border payments are problematic in a number of ways, usually frustrating businesses and consumers. One of the largest hurdles is high expenses. In addition, sluggish transaction speed during large payments can slow things down.
For instance, in case a US merchant makes a money transfer to China, the payment may take a route through a number of countries in order to reach the destination, leading to delays. Security problems are also problematic, given that international payments are exposed to higher risks of fraud and cyber-attacks.
Lastly, there is a common grievance of a lack of transparency, with most businesses and consumers finding it difficult to monitor payments in real-time. Businesses can overcome these issues with the use of new technology and enhance efficiency and security in cross-border transactions.
Major Requirements of PSD3 Compliance
PSD3 imposes a number of major requirements on merchants and payment service providers. It builds on the Open Banking model by extending data sharing to e-wallets and prepaid cards, as well as requiring secure APIs and customer consent management. New authentication requirements include increased time periods for trusted devices, new biometric factors, and real-time fraud detection.
PSD3 also responds to increasing contactless payment usage, increasing transaction limits and including security features such as PIN or biometric checks for large transactions. It oversees cryptocurrency and BNPL services, subjecting providers to rigorous licensing and consumer protection requirements.
Getting Your Business Ready for PSD3 Compliance
To have your business PSD3 compliant, begin by performing a gap analysis of your existing systems. Assess your payment processing infrastructure, data protection procedures, and customer verification frameworks to find out which ones require an upgrade.
Then, create a well-defined implementation plan with a budget, an upgrade timeline, training time for staff, and a risk management plan. Invest in technologies like upgraded APIs, stronger fraud detection software, and newer authentication technology to comply with PSD3’s new demands.
It is also important to offer extensive staff training on the regulations, implement internal compliance procedures, and build continuous education programs to ensure your staff remains current.
Types of Global Payments
Global payments exist in numerous forms, such as online transfers, checks, digital wallets, and even cryptocurrencies. With so many currencies and payment methods involved, it can be difficult to track payments and often raises the risk of fraud. Companies that deal with global payments must have a robust risk management plan to mitigate fraud or data breach risks.
The other issue is regulatory compliance. Most nations, including the U.S., have regulations such as Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. These regulations mandate companies to collect certain information on their customers and their transactions.
Comprehending AML Regulations & Laws
For international payment businesses, compliance with Anti-Money Laundering (AML) laws is paramount. These regulations, regulated by the Financial Crimes Enforcement Network (FinCEN), aim to reduce money laundering and fraud.
In order to remain compliant, companies need to assign an AML officer to oversee compliance activities, develop internal controls to detect high-risk transactions, and train employees to detect possible offenses.
Companies must also think about third-party audits to ensure that procedures are current and effective. In an age of changing digital payments, being aware of AML updates is essential to remaining in compliance and safeguarding against financial crime.
KYC (Know Your Customer) Standards & Compliance
KYC, or Know Your Customer, is a required component of Anti-Money Laundering (AML) compliance, which ensures that businesses confirm their customers’ identities. It primarily governs financial services but includes any business that receives funds.
KYC compliance has three primary elements which are Customer Identification Program (CIP), Customer Due Diligence (CDD), and Ongoing KYC. The CIP entails checking simple information such as name, date of birth, and ID to avoid illegal activity.
On the other hand, Customer Due Diligence evaluates the risk level of a customer, and one can do simplified, standard, or enhanced due diligence depending on the risk. Lastly, Continuous KYC keeps the customer information up to date, particularly if the nature of their transaction is altered. Periodic verifications keep companies in check and reduce fraud.
Technologies Simplifying Global Payment Regulation
Payment regulations around the world can be complex, but new technologies are simplifying them. Open Banking allows secure access to data through APIs, making payments faster and more compliant. Cryptocurrencies, with or without regulations, provide faster, lower-cost peer-to-peer transactions.
Conclusion
US merchants need to adapt to PSD3 and international payment rules in order to grow their business globally. Proper knowledge and system upgrades help to stay in compliance with the standards, companies can facilitate smoother transactions, increase customer confidence, and reduce legal threats. Adopting this will allow merchants to remain competitive in the fast-changing global economy.
FAQs
What is PSD3?
PSD3 is a new European Union regulation enhancing cross-border transaction payment security and transparency.
How does PSD3 affect U.S. merchants?
U.S. merchants need to comply with PSD3’s conditions when selling to European consumers.
What are the main changes in PSD3?
PSD3 strengthens authentication, open banking, and introduces rules on cryptocurrencies and BNPL.
Will PSD3 impact my payment processing systems?
Yes, you might need to modify systems for more robust authentication and improved fraud detection.
How do U.S. merchants prepare for international payment regulations?
U.S. merchants should modernize their technology and remain current with international payment standards.