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This dissertation was written as part of the Master of Laws (LL.M.) in Transnational and European Commercial Law, Banking Law, Mediation/Arbitration at the International Hellenic University. The ultimate aim of this paper is to enable academics, professionals in the banking sector, as well as every person interested in the field of economic law to comprehend the Commission’s legal framework for payment services in the European Union and the significant role that payments play for the liberalization of the financial services within the European Communities (EC) and for the realization of the internal market. The European Commission’s effort to create an efficient and true single European market was embodied, inter alia, in the creation and completion of the Payment Services Directive (PSD), the publication of which took place in autumn 2007. The PSD regulates the complex and highly technical field of payment services by setting up common rules on non-cash and electronic payments across the European Union (EU) and European Economic Area (EEA) with the purpose of facilitating the cross-border purchasing and by enhancing the financial safety net, consumer protection and competition. Undoubtedly, this Directive constitutes a key part of the so-called Single Euro Payments Area (SEPA) programme, an interinstitutional project1 that was initially fostered by means of the banking industry. This thesis aspires to unravel the payment services legislation within the EU, to analyze the types, instruments and providers of payment services focusing on the substantive provisions of the PSD and to examine the importance of this legal framework in the context of the broader vision of SEPA. In addition, it will elaborate the impact of the PSD on the payment system and the reasons that led to the adoption of the Payment Services Directive II.