Understanding PCI DSS, PSD2, PSD3, and AML in Payment Processing: A Practical Guide

If your users don’t feel secure when making a payment, they simply won’t come back. That’s not new. What’s often unclear is how to ensure both security and compliance in a rapidly evolving environment.

This is where frameworks like PCI DSS, PSD2, PSD3, and AML come in. Compliance isn’t just about checking boxes—it’s about protecting your operations and building long-term trust.

In this guide, we explain what payment security means, what these regulations require, how they impact your business, and how the right payment technology can help you meet these standards more simply and efficiently.

Why Regulatory Compliance in Digital Payments Matters

Compliance isn’t optional. It’s how you show your customers that their money and data are protected.

Customers expect their personal and financial information to be secure. Meeting compliance standards reduces the risk of fraud, chargebacks, and fines. Regulatory agencies also reward proactive compliance.

On the other hand, non-compliance exposes your business to data breaches, financial losses, and legal risks. That’s why digital payment security must always be a priority.

PCI DSS: Protecting Cardholder Data

If your business processes card payments, PCI DSS compliance is non-negotiable. This framework protects cardholder data and strengthens your infrastructure.

What is PCI DSS?

The Payment Card Industry Data Security Standard applies to any organization that stores, processes, or transmits card data. From banks to digital wallets, everyone must comply. It was created by card networks like Visa and Mastercard to prevent data breaches.

Key PCI DSS Principles:

• Build and maintain secure networks

• Protect stored cardholder data

• Restrict access to sensitive information

• Conduct regular vulnerability testing

• Implement a robust security policy

With the right tech partner, these requirements become manageable.

How PCI DSS Impacts Your Operations

• Shield your systems from costly breaches

• Builds customer confidence

• Future-proofs your infrastructure

PSD2: Open, Secure, Transparent Payments

PSD2 is reshaping how financial services are delivered. It pushes institutions to be more secure, open, and agile.

What is PSD2 in Simple Terms?

PSD2 promotes innovation through open banking. It requires banks and fintechs to open their platforms via secure APIs, allowing third-party providers to connect and deliver personalized experiences.

It also mandates Strong Customer Authentication (SCA) to reduce fraud. While PSD2 is a European regulation, its influence reaches globally, especially for international payments.

Why PSD2 Matters to You

• Enables secure third-party integrations

• Requires strong, multi-factor transaction authentication

• Increases consumer protection

Benefits of PSD2 Compliance

• Enhances user experience

• Reduces fraud

• Unlocks open banking opportunities

PSD3: Smarter, Safer, More Connected Payments

As the digital economy advances, PSD3 aims to build on and improve the foundation laid by PSD2.

What is PSD3? How Is It Different from PSD2?

PSD3 is the next generation of payment regulation from the European Commission. It strengthens security, expands user rights, and improves transparency.

Key Enhancements in PSD3:

• Stricter supervision of third-party data access

• Clearer anti-fraud rules, especially for instant payments

• Enhanced user control over financial data sharing

When Will PSD3 Be Enforced?

• Proposal submitted: July 2023

• Expected approval: Late 2025

• National rollout: 2026–2027 depending on region

Why PSD3 Is Relevant to Financial Institutions

• Enforces tighter control over data and access

• Delivers safer, more transparent payment flows

• Improves customer trust and regulatory alignment

Strategic Advantages of Aligning with PSD3

• Protects users from advanced threats

• Boosts API control and security

• Establishes your platform as a trusted payment provider

AML: Preventing Financial Crime in Payments

Financial crime constantly evolves. Anti-Money Laundering (AML) regulations help institutions stay ahead of risk.

What Is AML in Digital Payments?

AML is a set of policies designed to detect, prevent, and report suspicious financial activity. Compliance is mandatory for banks and payment processors.

Core Components of an Effective AML Program:

• Know Your Customer (KYC)

• Real-time monitoring

• Risk scoring

• Suspicious activity reporting

Why AML Compliance Matters

• Avoids penalties and reputational damage

• Ensures alignment with global standards (FATF)

• Strengthens credibility with regulators and partners

The Power of Combining PCI DSS, PSD2, PSD3, and AML

Each regulation plays a role—but together, they create a robust, future-proof security stack.

Integrated Value:

• PCI DSS protects cardholder data

• PSD2 enforces strong authentication

• PSD3 refines security, transparency, and trust

• AML prevents financial crime

Business Benefits of Unified Compliance

• Lower fraud risk

• More efficient operations

• Better user experience

• Reduced compliance costs

• Stronger brand reputation

The Role of Technology in Simplifying Compliance

Compliance can be complex—but with the right platform, it becomes a competitive advantage.

What to Look for in a Compliance-Ready Payment Solution:

• Real-time monitoring tools

• Secure and open APIs

• Integrated KYC and AML systems

• Built-in PSD2 and PSD3 support

• Full PCI DSS protection

Bonus: Time to Modernize Legacy Systems

Legacy platforms often struggle to meet modern compliance standards. Moving to API-based, microservices architectures enhances agility, improves integration, and future-proofs your operations.

Conclusion: Compliance as a Competitive Advantage

Meeting PCI DSS, PSD2, PSD3, and AML standards isn’t just about avoiding fines—it’s about gaining trust, protecting users, and unlocking growth.

Choose a technology partner that puts security, speed, and transparency at the core of your payment infrastructure.

At WAU, we help financial institutions modernize legacy systems with proven methodologies—without disrupting daily operations. Because innovation and compliance aren’t mutually exclusive. They work best together.