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    The impact of Payment Services Directive 2 on the PayTech sector development in Europe

    Polasik, Michał and Huterska, Agnieszka and Iftikhar, Rehan and Mikula, Štepán (2020) The impact of Payment Services Directive 2 on the PayTech sector development in Europe. Journal of Economic Behavior and Organization, 178. pp. 385-401. ISSN 0167-2681

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    The implementation of Payment Services Directive 2 (PSD2) has radically changed the regulatory environment for providing payment services in the European Economic Area. The main objective of the study is to determine the impact of PSD2 on the number of newly established PayTech companies. The second objective is to explain the factors driving the distribution of PSD2-licensed entities across the European Union countries. The difference- in-difference method and the Poisson regression model served our empirical analysis. The results show that the adoption of PSD2 in November 2015 caused a rapid but temporary surge in PayTech start-ups in Europe. After national transpositions of the directive, the number of new entrants fell in 2018; however, it remained at a higher level than before the adoption of PSD2, which indicates its positive impact. The analysis has proved that market potential, the characteristics of payment systems, including the popularity of payment cards, and the public environment for FinTech start-ups provided by the authorities significantly affected the number of PSD2 licences issued. The introduction of the PSD2 has made the size of the domestic market play a smaller role, as PayTechs can operate on a pan-European level also while based in a smaller country. The importance of an open business environment has increased and offering regulatory sandboxes has proven to effectively support the development of the PayTech sector.

    Item Type: Article
    Additional Information: © 2020 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license. ( Cite as: Michał Polasik, Agnieszka Huterska, Rehan Iftikhar, Štěpán Mikula, The impact of Payment Services Directive 2 on the PayTech sector development in Europe, Journal of Economic Behavior & Organization, Volume 178, 2020, Pages 385-401, ISSN 0167-2681, . Funding: s. This work was supported by the National Science Centre, Poland under Grant No. 2017/26/E/HS4/00858. It also received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Skłodowska-Curie grant agreement No. 765395 and supported, in part, by Science Foundation Ireland grant 13/RC/2094.
    Keywords: PSD2; Financial regulation; Payment innovation; Payment services; FinTech; PayTech;
    Academic Unit: Faculty of Social Sciences > School of Business
    Item ID: 13674
    Identification Number:
    Depositing User: Rehan Iftikhar
    Date Deposited: 27 Nov 2020 15:00
    Journal or Publication Title: Journal of Economic Behavior and Organization
    Publisher: Elsevier B.V.
    Refereed: Yes
    Funders: National Science Centre, Poland, H2020 Marie Skłodowska-Curie Actions Grant 765395, Science Foundation Ireland (SFI)
    Use Licence: This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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