Companies and consumers across Europe are potentially facing a surge in online payment failures as the September deadline to implement PSD2, or the Revised Payment Service Directive, approaches.
From September 14, 2019, all online retailers will have to ensure that they are compliant with PSD2 legislation. PSD2, an EU directive, mandates that any online transaction over 30 euros will require improved authentication. Any firm that sells online in the EU will be required to meet these standards.
This will mean that anyone making an online purchase will be required to identify themselves through two-factor authentication (2FA). European businesses which are not PSD2 ready by the deadline are looking at a steep rise in the number of payment failures, and heavy fines.
According to Gill Murphy, head of payment schemes at Ireland’s Banking and Payments Federation, consumers should in theory have little to worry about, but must follow any new instructions from their bank.
“It is vital that consumers take the time to carefully read the information provided by their bank in relation to PSD2,” Murphy said.
“This information will outline what changes customers can expect as well as any actions that they may need to take in order to ensure continued access to their online accounts without interruption.”
Companies meanwhile are being urged to check with their payment service providers that 2FA has been enabled.
PSD2 enables bank customers, both individuals and businesses, to use third-party providers, such as Facebook and Google, to manage their finances while still having their money safely placed in banking current accounts. Banks are obliged to provide third-party providers access to their customers’ accounts through open APIs. This enables third-parties to build financial services on existing banking data and infrastructure.
Banks will therefore have to compete with any company offering financial services.
PSD2 aims to improve innovation in the FinTech industry, reinforce consumer protection, reduce fraud and improve the security of internet payments and account access within the EU and EEA.