Payment Services Directive 2 (PSD2) is a new piece of financial regulatory policy that is taking the EU payment services landscape by storm. But, even if you don’t currently conduct e-commerce within the EU, you may want to think about adhering to these regulatory technical standards and becoming PSD2 compliant anyway.
The digitization of customer data certainly makes things more convenient, but with fraudsters constantly coming up with new ways to steal information, that data also becomes more vulnerable-- staying one step ahead of scammers by introducing digital security measures to protect your customers and your business is always a good idea. You can use the regulatory technical standards outlined in PSD2 to build trust with your customers and rise above the competition with top-of-the-line fraud prevention methods.
Payment Services Directive 2 requires that merchants and payment service providers implement additional verification checks, like Strong Customer Authentication, and leverage the digital identity behind phone numbers to protect their online platforms. Using dynamic linking, risk prediction models, and APIs that satisfy PSD2, you can seamlessly match inputted data to an end-user's digital footprint to verify their identity without added friction to your customers. It’s one of the best and easiest ways to boost your platform security. If any of these sound like you, it’s time to think about becoming PSD2 compliant.
Being a victim of fraud is not cheap—not only can online fraud result in lost or stolen data to the customer, but it can also be costly to your business. If a customer reports fraudulent activity on their account, following up and resolving the fraud claim as quickly as possible is important. This requires time and manpower spent on customer support and manual verification in addition to the cost of refunding fraudulent payments, not to mention the cost of the hit to your brand’s reputation. It is ultimately much cheaper and more convenient to implement PSD2-compliant fraud protection APIs that automatically monitor suspicious activity on your site and can put a stop to fraud before it even begins.
One potential cost to customer data fraud is a hit to your brand’s reputation. Studies show that at financial institutions, even after fraud resolution, nearly 1/3 of customers close their accounts. So, just a few instances of account takeover can cause consumers to lose faith in your brand and result in a loss of customers while making it harder to attract new ones. People only have so much tolerance for risk, and when there are so many other online shopping options, customers will flock to E-stores that they know they can count on to keep them safe.
One of the pros to in-person shopping is that on-site employees can assist and cater to the needs of each individual customer. Some of that personalization is lost in the eCommerce space, but that doesn’t mean it’s entirely gone. PSD2 compliant Digital identity APIs can help you Know Your Customer (KYC) and provide not only a more secure online shopping experience, but also a more personalized one.
Financial technology is constantly growing, and the most recent shift toward open banking represents major growth in the eCommerce and payment service industries. That growth is spreading worldwide; China, Japan, Australia, Singapore, Mexico, and Latin America all support open banking practices and it’s also on the rise within the US. Open banking means a streamlined payment approval process which is more convenient for all parties, but if you’re a merchant, you’ll want to back up that open flow of data with increased platform security. PSD2 was implemented to do exactly that, so by becoming PSD2 compliant, you’ll mitigate the exact risk the policy was designed to combat.
Whether or not you prefer eCommerce over in-person shopping, there’s no getting around the fact that the world is becoming more and more digital, and businesses that can’t adapt will fall by the wayside. As eCommerce becomes more streamlined, customers will come to expect both a seamless and secure online shopping experience. If you’re not able to provide that, you risk losing customers to your competitors. To be ready for the next era of online commerce, you’ll want to make sure you have the digital infrastructure in place to protect the customer experience and there is simply no better or easier way to do that than with the same digital identity APIs that companies employ to become PSD2 compliant.
This one might seem like a no-brainer, but we figured we’d mention it anyway. For merchants and payment service providers within the EU, PSD2 compliance is not optional. Failing to adhere to its regulations could result in fines or penalties to your business.
Technically, the requirements only officially apply to transactions in which both the card issuer and the acquiring bank are in the European Economic Area but given the benefits that the increased security standards provide, we expect that many European card issuers will apply the same rules across all transactions, regardless of the merchant’s location.
Now you know all the benefits to PSD2-compliance, but you might be wondering how to make it happen-- we can help. As the leaders in 2FA, TeleSign's digital identity solutions are specially designed to create the strong customer authentication and dynamic linking required by PSD2. Our Score and PhoneID APIs, along with our expansive global network, mean that we have the infrastructure in place to help you integrate PSD2 compliance into your online platform seamlessly and effortlessly. Want to find out more about how we can help you achieve premium platform security? Contact us today (link)
We’re ready to help you:
✓ Streamline & secure onboarding
✓ Reach your customers on the channels they trust
✓ Safeguard your customers’ accounts
✓ Establish comprehensive fraud protection