Supporting PSD2 regulation – priority payment (SWIFT) charge types

The Payments Security Directive 2 (PSD2) is European legislation that aims to create transparency, greater competition and better security in correspondent banking across Europe.

As part of this regulation, all priority (SWIFT) payments created in any currency being sent to an EEA country are now required to be sent using charge type Shared (SHA). Our platform will be updated on 31st May 2019 to give you time to prepare and make sure we are all compliant.

Overview

Priority payments are sent via the SWIFT network. When a payment is sent via SWIFT, intermediary bank charges may apply. Our functionality allows the payment creator to decide if they want these charges to be deducted from the payment amount or not.

There are two types of payment charge type; Shared (SHA) and Ours (OUR). Under the EU Payments Service Directive (PSD2) regulation, there are certain conditions that apply when making payments to countries in the European Economic Area (EEA).

What is PSD2?

PSD2 is European legislation that aims to bring about transparency, greater competition and better security in correspondent banking across Europe. PSD2 follows on from the original Payment Services Directive (PSD), which was adopted by the EU in 2007.

This legislation established an EU single market for payments to encourage the creation of safer, more innovative payment services. PSD’s authors also aimed to make cross-border payments in the EU as easy, efficient and secure as payments within a member state.

How does this change affect you?

To meet the original PSD1 requirements, any priority (SWIFT) payment created in an EEA currency going to an EEA country was automatically sent via SHA. Even if you had selected OUR within the platform, our systems would override this selection to ensure your payment complied with EU regulations.

PSD2 extends this legislation further. Now, priority (SWIFT) payments created in any currency that are being sent to an EEA country will be required to be sent SHA. Our platform will be updated on 31st May 2019 to ensure both our clients and Currencycloud are complying with this regulation. Here are a few examples of the changes in action:

  • USD SWIFT payments to France will now automatically be sent SHA
  • USD SWIFT payments to Singapore will still respect the charge setting on the client’s account
  • EUR SWIFT payments to Germany will now automatically be sent SHA
  • EUR SWIFT payments to Hong Kong will still respect the charge setting on the client’s account
  • CHF SWIFT payments to Poland will now automatically be sent SHA
  • CHF SWIFT payments to Switzerland will still respect the charge setting on the client’s account

The full list of EEA countries and territories subject to PSD2 regulation is available here.

How will this benefit me?

There are a number of benefits for clients including;

  • Reduced costs associated with payment fees
  • Better transparency and visibility between you and your customers
  • Increased reliability and security of your payments – peace of mind that your business is compliant with PSD2 standards
  • Improved efficiency – payments will automatically be re-routed to the correct payment charge type

Do I have to do anything?

You’ll need to understand the new conditions surrounding priority payment charge types to determine whether or not this affects the payments you are instructing in the future. If you’re instructing Swiss Francs (CHF) payments, please take extra notice of the PSD2 implications. CHF is the currency of both Switzerland (not subject to PSD2) and Lichtenstein (subject to PSD2):

  • CHF payments sent to any country subject to PSD2 regulation will be sent SHA
  • CHF sent to Switzerland will still respect the charge type chosen on your, or your customers, account

I am an API user, do I need to do anything additional?

All API clients should ensure that the charge_type setting is passed in the ‘Create Payment API’ if this needs to supersede their account settings.

What happens next?

There is no requirement for you to change anything within your platform, only be aware of the new conditions when making SWIFT payments and choosing your payment type.

  • Charges Shared (SHA): Any SWIFT payment sent Charges Shared (SHA) to countries in the European Economic Area (EEA) may incur additional correspondent banking fees. These fees will not be deducted from the payment amount and will be listed as a separate charge.
  • Charges Ours (OUR): SWIFT payments to countries in the European Economic Area (EEA) cannot be sent using Charges Ours under the Payment Services Directive 2 (PSD2), irrespective of the currency of the payments or if an FX conversion is involved. Any SWIFT payment sent to countries in the EEA will automatically default to Charges Shared.
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