PSD2 Processes: What If You Implement Them Poorly?

Sep 17, 2019

What do you think about the Strong Customer Authentication elements of the European Payment Services Directive 2 (PSD2)? Would they bring changes to fraud liability issues? In fact, the realization of the regulation is associated with more than one thing. These should be taken into account when managing online fraud attacks. To know more about the PSD2 processes and discover a unique payment processor to work with, just read below.

PSD2 Processes and Their Implementation
The last 20 years have resulted in a vivid shift of commerce to online space. People are increasingly buying and selling products/services on the internet or through mobile apps.

On the other hand, fraudsters are increasingly getting smarter and using more sophisticated tools to benefit from such shift. Simple hacking systems have turned into more advanced fraud techniques to hack credit cards, steal sensitive data, and hit systems with scale.

The Strong Customer Authentication (SCA) requirements of the Payment Services Directive (PSD2) were set to become legally applicable on September 14, 2019. Well, what’s this PSD2? It’s the reviewed version of the original Payment Services Directive. According to PSD2, payment service providers (PSPs) must make a number of changes to the current operations.

According to SCA, merchants must use 2FA (two-factor authentication) for customer identification and authentication. This is vital for building consumer trust and security. Namely, this requirement is for cases when consumers pay over the internet or when dealing with transactions processed within the E.U.

As for 2FA, its authentication has to do with 2 of 3 mechanisms; inherence, possession or knowledge.

One of the main goals of PSD2/SCA is to mitigate the fraud that affects online payments. It’s crucial to take into account the fact that if PSD2 technical processes are implemented poorly, they’ll result in increased friction for customers.

What about you? Are you keeping up with the latest developments in the payments industry? Do you have the right protection for your online transactions? If not, it’s high time you turned to a reliable merchant services provider like that’s ranked as the #1 high risk processor in the U.S.

Moreover, EMB is listed as an A company by Card Payment Options and an A+ company by the Better Business Bureau. In addition, ValuePenguin considers EMB the “Best All-Around High Risk Merchant Account Provider.” So, can best help you with PSD2 processes.

Introduction of PSD2 & Resulting SCA
The Second Payments Services Directive is designed to make online transactions more transparent and secure. However, like anything else in life, it also has its challenging side, which is mainly associated with the new requirement of Strong Customer Authentication (SCA). This can help prevent fraud, but also increase friction.

Below you can find some basic components associated with PSD2 that can’t leave merchants, banks, and cardholders unaffected:

  • Strong Customer Authentication (SCA), which implies higher standards for customer authentication during the checkout process
  • Access to Accounts (XS2A), which makes the consumer payments market available to non-institutional players

Modern marketplaces have turned into major drivers of e-commerce across the world. In Europe, because of PSD2 and the SCA requirements, marketplace payment processes are being scrutinized more intensively, pressuring platforms to develop higher authentication standards while cutting payment process friction and maintaining a positive customer experience.

PSD2 and the corresponding rules aim to reduce fraud. However, both issuers and acquirers, retailers and banks have to adopt some highly important changes to their operations and technology. On the other hand, the cooperation from tens of millions of consumers, who mostly lack information about the changes, creates another challenge.

According to PSD2, 3rd parties should have a way to access financial data, with customers giving their approval. This is similar to the mobile banking experience for users.

Apart from PSD2, 3DS 2.0 is another hot-button topic in payments. It’s a new standard introduced by EMVCo and the large credit card schemes.

To sum up, PSD2 or the revised Payment Services Directive is European Union legislation aimed at improving consumer rights, cutting fraud, and enhancing more innovative payment methods. Any PSD2 process must be implemented properly, otherwise, it can result in increased friction.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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