iovation, the TransUnion owned fraud prevention and authentication solutions provider has published a critical report developed in partnership with consumer research advisory Aite Group titled “PSD2: Advent of the new payments market in Europe.”
The report incorporates original research and analyses on the consequences for the global online payments and its wider stakeholders on the revised provisions of the European Union Payment Services Directive (PSD2).
By September 2019 payment service providers in the European Economic Area (EEA) have to comply with the directive’s requirements for ‘strong customer authentication’ (SCA) and third-party access to bank accounts or risk getting their payment provider license revoked.
Referring to a recent study by Mastercard, it was discovered that only 25 percent of European online merchants are aware of SCA requirements under PSD2.
Since companies providing payment services in the EEA are subject to the regulation, businesses with headquarters outside Europe may also need to comply.
“The zeitgeist of regulations with extra-territorial effect like GDPR continues with PSD2. This will have long-standing operational implications to companies wherever they are based,” said iovation Compliance Manager, Mark Weston.
The report concludes the stricter requirements for fraud prevention in the EU will drive fraud to other regions such as the US – it also warns that most companies are unprepared for PSD2.
Weston continued: “The merchants that succeed post PSD2 will be those that make consumer authentication as effortless as possible through methods like ‘invisible’ device-based authentication and biometrics. And with the likes of Facebook and Google becoming payment processors, merchants are going to have to compete with an ever-widening marketplace.”