EU fraud protection rules: New EU Measures to Stop Digital Scams

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Background—Why New Rules Were Introduced on EU fraud protection rules

Online fraud (e.g., fraudulent payments, scams, phishing, and suspicious transactions) has seen a significant increase in European countries. Fraud has become easier than ever before through digital payments, banking, and social media. Consequently, consumer (bank/payment service users) protection, data risks, and mitigating losses in the event of fraud have become a priority. To address this issue, the EU proposed major changes to its existing rules for payment services and online platforms. Recently, EU Member States and the European Parliament agreed on these new proposals—which will strengthen “online fraud protection.”

What’s New – Key Provisions on EU fraud protection rules

The key changes/provisions in the new rules (adopted as a rules package) are as follows: Increased responsibility for payment service providers (PSPs) Banks, payment service providers, and other institutions that process digital/online payments will be responsible for customer losses if they fail to implement appropriate fraud prevention measures. Meaning: If your payment service provider fails to prevent fraud and you lose your money, that institution will bear your losses. Restrictions on blocking and freezing suspicious transactions If a transaction is found to be “suspicious,” the PSP will be required to “freeze” it. Before sending a payment, the payee’s name and unique identifier (such as bank account, IBAN, etc.) must be matched. If they don’t match, the payment will be blocked and the user will be notified.

Dual Authentication and Strong Customer Identification (Authentication & Verification) PSPs will be required to conduct a risk assessment. They will provide spending limits and blocking measures, which will reduce the risk of fraud. Customer support will also undergo changes—it will no longer be limited to chatbots, but “human” customer service should be available.

Data Sharing and Cooperation among Payment Providers

Sharing of fraud-related information among payment service providers (PSPs) will be mandatory. In particular, coordination in IBAN/account name matching, transaction tracking, suspicious activity identification, etc. will help prevent fraud. Consumer education and awareness resources (public resources) will be released to educate consumers about online fraud—its types, identification, and prevention. The aim is to encourage users to be vigilant, understand how fraud occurs, and exercise caution when banking or making payments. Fair competition among PSPs / Open Banking: The new rules will reduce barriers for new, open-banking service providers. They will be able to easily access bank account data. However, with this development, it will be essential to strengthen security measures—to balance both innovation and security.

Objective of these rules & What to expect

Consumer protection—To reduce financial losses due to fraud, cyber fraud, suspicious transactions, etc. Trust building—People’s trust in banks, payment services, online platforms, etc. will increase, making it easier to adopt digital payments. Transparency—Fees, payment charges, and fees will become clearer. Security with technology and innovation—Services involving new payment technologies, open-banking, etc. will be promoted, but security aspects will be incorporated from the initial stage. Bridging the digital divide—Cash and digital payment options will be available even in rural and remote areas. Preventing unfair advertising/scams — Countering sources of fraud by making online platforms more accountable.

What challenges/questions need to be monitored?

While the new regulations are very important and positive, there may still be some challenges—or some things that are unclear: Compliance — Burden for PSPs and platforms: Banks, small payment service providers, and online platforms will need to become more efficient—implement resources, systems, identification/checking, etc. This may be costly for smaller PSPs. Data confidentiality and privacy: Data security and privacy will need to be considered when sharing fraud-related information, account-name matching, etc. Conservative user habits: Those unfamiliar with digital payments or who prefer cash may find it difficult to accept the new changes.

Current Status and Further Process

This deal is currently provisional; For it to be fully implemented, formal approval by the European Parliament and all member states (Council) is required. Once implemented, it will become part of the Third Payment Services Directive (PSD3) or the new Payment Services Regulation (PSR). In addition, the role of services such as online platforms and social media (removing fraudulent ads, preventing scams) will also be legally expanded. Consumer awareness campaigns, customer support (human support), blocking/prevention measures, etc. will all need to be implemented.

If you are in India Looking from another country—what are the lessons?

Although these rules are specific to the European Union (EU), the challenges of digital payment fraud exist worldwide. These could be some important lessons for other countries, including India: Responsibility of payment service providers (banks, fintech, UPI services, etc.)—if they fail to prevent fraud, they should bear the costs. Consumer education and awareness: People should understand how fraud occurs and how to protect themselves. A balance between digital and cash options—to reduce the risk associated with digital transactions and ensure convenience for all. As the Reserve Bank of India (RBI) is implementing its digital payment security rules, including two-factor authentication (2FA), in India, it shows that such a shift is taking place in many countries.

Conclusion—Why this change is important on EU fraud protection rules

The new rules lay the foundation for security for millions of people who conduct online payments, banking, and digital transactions every day. It’s an effort to curb the dangerous trend of fraud, protect consumers, and increase financial confidence. A holistic approach is being adopted, encompassing all three platforms—digital payments, online banking, and social media marketplaces. If implemented and implemented correctly—it will make the digital world safer for end users by preventing fraud, scams, false advertising, and more.