The Urgent Need for Vendors to Get PSD2 Compliance Software

Surprisingly, many people involved in the global online payments industry are still unaware that there’s not enough time to abide by Payment Services Directive II’s Strong Customer Authentication (SCA) standards. Vendors, banks, issuers, and customers all need to meet these standards to keep engaging freely in eCommerce transactions.

SCA necessitates multi-factor authentication for all eCommerce payment transactions. There are some exceptions, like recurring payments from subscription holders or payments below €30. The official deadlines for implementing SCA standards vary between different regions of the European Economic Area (EEA) and the UK –

January 1, 2021 – SCA standards will be enforced in most countries in the EEA.
April 1, 2021 – SCA standards will be implemented in France.
September 15, 2021 – SCA standards will be implemented in the UK and Switzerland.

This haphazard implementation schedule has instigated a great deal of commotion. Some banks are set to decline all non-SCA payments from January 1st 2021.

Hence, all vendors and payment service providers are under immense pressure to implement SCA as quickly as possible. Customers expect to cross additional security checks (SCA) while shopping online from January 1st, 2021.

Why do Vendors Need to Hurry?

PSD2’s Impact on a Global Scale

Technically SCA applies only in cases where the buyer (or the card issuer) and the banks involved in the transaction are Europe-based. But, many banks plan on applying these regulations for all transactions, irrespective of the customers’ geographical locations. Most European issuers plan to apply SCA rules notwithstanding of the merchants’ locations. So, irrespective of where a vendor is located, if one part of your transaction involves an EU customer or organization, you need to be fully PSD2 compliant.

CNP Fraud on the Rise

In 2011, payment fraud cost businesses $9.84 Billion. In 2020, the losses amount to $32.39 billion. It’s clear that payment fraud across the world is on the rise. Card not Present (CNP) fraud, in particular, is affecting Europe in a bad way. In 2018, CNP fraud cost businesses within the Single Euro Payments Area (SEPA) €1.43 billion – a 17.7% increase compared to 2017.

In card, not present fraud, fake customers make orders online using stolen credit card information. SCA requirements were fashioned to battle this type of fraud. The European Central Bank views card not present fraud as the number one threat to euro payments made online. That’s why vendors mustn’t treat SCA as a non-serious issue.

No More Deadlines

The December 31st deadline for implementing SCA is the last one. Ever since the 14th of September 2019 was mentioned as the official date for implementing PSD2’s SCA standards, the European Banking Authority (EBA) has suspended the deadline many times. Fifteen months later, the EBA has made it clear that such delays won’t happen again.

Customer Demands for Security

The coronavirus pandemic has triggered an enormous rise in the use of financial technology apps in Europe. In 2020, the use of fintech apps in European countries grew by 72%, proving once and for all that the long-term impact of the pandemic will be a society that’s very digital and cautious about its financial safety online.

Implementing SCA – The Faster, the Better

The most important reason to implement SCA as quickly as possible is that it is customer-friendly. PSD1 and PSD2 were both designed for the average online shopper. The overriding theme of these directives is that customers should make the most of the EU’s open banking efforts. Hence, banks and vendors need to improve both financial security and user experiences. Verifying online shoppers in the quickest and least invasive ways possible should be the goal of every vendor and bank, and that’s what the implementation of SCA does.

Businesses that are quick to implement SCA will –

Have adequate time to acclimatize their business to these new processes and employ the best practices.
Adjust their payment processing processes data to improve frictionless payment experiences.
Collect data to create better exemptions policies.

The new SCA requirements are instituted to protect shoppers and sellers from online payment fraud. When implemented properly, the minor changes that vendors will experience won’t be disruptive. Certain features of the regulation will also unlock new opportunities and potentially save online sellers a lot of money.

How to Be SCA-Compliant – Two Easy Ways

Make Real-Time Decisions Using SCA-Compliant Software Solutions

Using PSD2 compliance software will give vendors real-time decision-making capabilities. These tools help vendors categorize transactions as they are being made. Payment platforms can determine on the spot which authentication process needs to be observed for what type of customer. Deployment of these software tools makes it possible for online sellers to carry out plenty of verification processes that are unnoticeable to shoppers. For instance, if a transaction warrants an exemption, the software will automatically ensure it doesn’t go through enhanced account verification processes. Fraud screening and instant reporting of fraud attempts also become easier.

Team Up with SCA-Compliant Banks and PSPs

Lastly, vendors need to work with payment service providers and banks that are compliant with SCA. They should offer maximum support to vendors planning to implement strict compliance standards.