PSD2: how it will affect firms

PSD2, or Payment Service Directive 2 as it’s formally known, is the new payment system that has been set up to further protect customers when paying online. Although the original PSD was set up by the EU back in 2007, an updated version is becoming a legality that businesses must adhere to this weekend.

The new system aims to improve customer rights by focusing on transparency, complaints, surcharging, and reporting, according to Barclaycard.

The bad points

However, the online payment system has not come as a welcome solution to all, with many establishments complaining of its potential to drastically change the current, already working, process.

Although the new method is beneficial to the security of the customer, which is never a bad thing, firms who rely on customers and sales (such as hospitality companies) may end up with no protection when it comes to dealing with client shortfalls.

This is as the updated system requires two forms of identification. So, for example, if a hotel has a no show, it will not be able to charge the customer. Because using just the required credit card number provided would not be sufficient enough by itself to take a payment from the client’s account and the hotel would be left out of pocket.

The good points

Simon Marchand, Chief Fraud Prevention Officer at Nuance Communications has commented on the system. He says, “While the deadline requiring those handling online payments to incorporate strong customer authentication (SCA) has been extended beyond 14th September, we recommend such organisations get ahead of the curve in terms of investing in safeguarding technology.”

“The legislation will call for the relevant parties to incorporate at least two of the following three elements: a password or PIN, smartphone or hardware token or biometric authentication. Today, organisations will be asking themselves, how do we maintain compliance while – at the same time – reduce friction for our customers?” The answer to that is, in our opinion, is the “something you know” aspect should be avoided. PINs or passwords can be forgotten, often leading to a bad experience. Using biometrics such as voice makes for a seamless customer experience.” He continued.

Marchand added, “They don’t need to remember something specific and can simply speak a sentence to be authenticated. And their voice can’t be stolen, unlike passwords. Deploying biometrics far in advance of the March 2021 deadline provides an opportunity for organisations to clearly sign-point their commitment to tackling fraud and safeguarding their customers’ information.”


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