Will the new PSD2 regulation affect your eCommerce?

In a few weeks, the new PSD2 SCA regulation comes into force. To learn the details, we interviewed Juan José LLorente, Country Manager in Spain for Adyen, the global online payments solution that lets you accept payments in any country and channel.

• What is PSD2?

It’s a European directive regulating payment services and providers across the European Union. It introduces new ways of fighting fraud through SCA (Strong Customer Authentication), which means authentication is required using two of the three security factors:

• Something you know: PIN, password…
• Something you have: a card, a token
• Something you are: biometrics (facial or fingerprint recognition).

SCA is mandatory for all online transactions when both the merchant and the issuer are in the EU, although there are some exceptions we’ll look at later.

PSD2 improves the customer experience and makes it possible to understand customers’ buying patterns.

• When does the PSD2 SCA regulation come into force?

In Europe, on September 14, but bear in mind that other regions such as Brazil, Australia and India are considering adopting it.

• How will SCA affect online stores? What are the consequences?

There will be a direct impact, since all transactions will need to be authenticated in the new format defined by this regulation; an unauthenticated or incorrectly formatted transaction risks being declined by the issuer. Declined transaction, lost sale.

• Do all transactions need to be authenticated under SCA?

In certain cases it isn’t mandatory. There are out-of-scope transactions, which are 100% exempt from strong authentication, meaning no 3DS, unless the merchant requests it for risk management. Currently, there are 4 possible cases:

1. Interregional Transactions: one of the parties involved (buyer and/or seller) is outside Europe
2. Direct Debits and “Merchant initiated transactions”. The seller charges the buyer’s card without the buyer being present.
3. MO/TO transactions (Mail Order / Phone Order), i.e. card-not-present transactions by phone or email
4. Anonymous cards: cards that can only be identified by the issuer

On the other hand, the seller, or the acquirer on its behalf, can request that a given transaction not be authenticated. These are known as exemptions:

1. The buyer adds the merchant to an issuer whitelist during a first transaction with strong authentication
2. Same merchant, same amount, same frequency
3. Transactions under 30 EUR. Authentication is required in some cases
4. Payments made through internal corporate processes not available to end consumers.
5. Real-time Transaction Risk Analysis. Whether it can be requested depends on the transaction value and the acquirer’s fraud level

When SCA is applied, potential financial liability lies with the card issuer, but when it isn’t, financial liability always lies with the seller.

• Can the new regulation affect the store’s revenue?

Definitely. Merchants that decide not to update their platform will see sales fall, since transactions will be declined and customers will go to the competition or simply stop buying from them.

• What changes will online shoppers notice?

They’ll have to authenticate much more often than today. Surprise, and possibly abandonment, if they’re unaware of the upcoming change. There will be a learning curve that it would be good for everyone to speed up.

• What impact will it have on the payment methods sector?

It’s a positive and necessary change. It’s an opportunity to open up the sector to more competition, encouraging competition and innovation. We’ll be able to make safer card-not-present transactions, meaning greater fraud protection for both consumers and merchants.

• How has Adyen adapted to the new PSD2 regulation?

We’ve been the only platform to develop a solution that has applied this regulation from the very beginning. Thanks to this, we’ve been able to evolve to 3DS2, allowing merchants to fully adapt to the new regulation, greatly reducing their workload and building the logic on the intelligence and functionality of our dynamic 3DS system. In fact, it’s already deployed at companies such as Spreadshirt, Uber and Grupo Meetic. One of the biggest advantages is easy integration, as 3DS is included in Adyen’s APIs

• As payment systems experts, what advice would you give readers?

Get ready, adapt their internal processes and invest in secure technology that lets them comply with the new legislation while improving their customers’ payment experience and minimizing the impact on conversion rates.

Thanks to the integration of Adyen with LogiCommerce, your online store can grow in any country, with any card from any bank

Don’t hesitate to contact us for more information about Adyen. TLG Commerce adapts to your needs, offering tailored solutions for every business.