Economic Implications of the Payment Services Directive 2: Empirical Evidence from the Capital Markets

Abstract

This study is the first, to our knowledge, to analyze the effect of the Payment Services Directive 2 on the European banks’ stock returns. The financial market data is analyzed using the event study methodology. Our findings show that the PSD 2 has had a statistically significant positive impact on the stock returns of the European banks. Specifically, the overall effect is estimated to be a 2.78% - 6.89% increase in stock returns for an average EU bank. Moreover, the interpretation of the findings provides important implications for various stakeholders on the digital payment services market. In addition, this study offers an early evaluation of the regulation’s performance in terms of achieving its intended results. The conclusions drawn in this study suggest that the positive valuation of the PSD 2-related events by investors may serve as a necessary incentive for the banks to become compliant with the directive’s requirements. Consequently, it may contribute to the PSD 2’s ability to fulfill its goal in creating more secure and innovative digital payment services. However, further examination is warranted regarding the regulation’s potential of improving the competitive situation on the market.