---
url: 'https://www.corbado.com/faq/psd3-psr-directive-to-regulation-significance'
title: 'Why is the shift from directive to regulation significant?'
description: 'The shift from PSD2 (directive) to PSD3/PSR (regulation) ensures uniform enforcement across the EU, eliminating inconsistencies and enhancing security.'
lang: 'en'
---

# Why is the shift from directive to regulation significant?

## Why Is the Shift From a Directive (PSD2) to a Regulation (PSD3/PSR) Significant?

The transition from **PSD2 (Payment Services Directive 2) to PSD3 (Payment Services
Regulation – PSR)** marks a crucial evolution in European financial regulation. The key
difference lies in **how the law is applied across EU member states**.

### 1. Regulations Apply Uniformly Across the EU

- **PSD2 was a directive**, meaning each EU country **interpreted and implemented it
  separately**, leading to **inconsistencies in enforcement**.
- **PSD3 will be a regulation (PSR)**, which means it **applies directly to all EU member
  states without variations**, ensuring **standardized security, compliance, and consumer
  protections**.

### 2. Stronger Consumer Protections & Security

- [PSD3](https://www.corbado.com/blog/psd3-psr-passkeys) refines **Strong Customer Authentication (SCA)** rules,
  ensuring better **fraud prevention and fewer exemptions**.
- With **consistent security standards**, [payment](https://www.corbado.com/passkeys-for-payment) providers and
  financial institutions must adhere to **phishing-resistant authentication** methods,
  such as **passkeys**.

### 3. Better Market Competition & Innovation

- [PSD3](https://www.corbado.com/blog/psd3-psr-passkeys) promotes **fairer competition** by improving **access
  for non-bank financial service providers (PSPs)**.
- It **encourages innovation in authentication and payment technologies**, including
  **biometrics and passkey-based login systems**.

### 4. Clearer Guidelines for Payment Service Providers (PSPs)

- Under [PSD2](https://www.corbado.com/blog/psd2-passkeys), differences in national laws created **uncertainty
  for financial institutions**.
- [PSD3](https://www.corbado.com/blog/psd3-psr-passkeys) establishes **universal rules for security, compliance,
  and fraud monitoring**, reducing legal ambiguity.

### 5. Stronger Compliance for Digital Authentication

- **PSD3/PSR aims to align payment security with modern authentication trends** by:
    - Expanding **SCA requirements** to ensure stronger fraud protection.
    - Encouraging the adoption of **passwordless authentication, such as passkeys**.
    - Reducing reliance on passwords and OTPs, which are prone to
      [phishing](https://www.corbado.com/glossary/phishing) attacks.

## Conclusion

The shift from **PSD2 as a directive to PSD3/PSR as a regulation eliminates
inconsistencies, enhances security, and promotes seamless digital payment innovation**.
For organizations implementing **modern authentication solutions like passkeys**, PSD3
ensures **standardized security requirements across the EU**, making compliance **simpler
and more predictable**.

## Read the full article