Zahlungsdiensteaufsichtsgesetz

Zahlungsdiensteaufsichtsgesetz, abbreviated ZAG, is a German federal law that implements the European Union's Payment Services Directives (PSD1/PSD2) by regulating licensing, supervision, and conduct of payment service providers in Germany. It aims to ensure secure, reliable, and competitive payment services and to protect consumers and the integrity of the payments system.

Scope and providers: The ZAG applies to entities that provide payment services in Germany, including banks, payment institutions (Zahlungsinstitute), and electronic money institutions, as well as providers of services such as payment initiation and account information under PSD2. It sets licensing requirements, ongoing supervisory duties, capital and governance standards, safeguarding of customer funds, risk and IT management, outsourcing, and transparency obligations to customers.

Supervision and enforcement: BaFin, often in coordination with the Deutsche Bundesbank, supervises license holders and enforces ZAG provisions. It can grant, suspend, or revoke licenses, conduct inspections, require remedial actions, and impose penalties for non-compliance. The act interacts with the Banking Act (KWG) and other German financial-market regulation.

Open banking and PSD2: A core element of PSD2 implemented through the ZAG is access to payment accounts by authorized third-party providers, subject to security requirements such as strong customer authentication. This framework supports new payment services while protecting users and the reliability of the system.

Impact: Since its introduction the ZAG has been amended to reflect EU updates and evolving market practice and remains a central component of Germany’s regulation of payment services and payment service providers.