How Payment Services Directive 2 impacts consumers

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The new Payment Services Directive 2 (PSD2) comes into effect on the 14th of March in the UK and will impact consumers any time they make an online payment. The requirement is for Strong Customer Authentication (SCA) and will involve an additional step as retailers need to prove who the customer is when they make a payment – logging into your website with a user name and password is no longer sufficient. Generally PSD2 requirements will be handled by your payment service provider, but if you manage your own payment gateway for your website then you’ll need to implement PSD2 yourself.

PSD2 impacts for consumers

Many consumers will simply consider the Payment Services Directive 2 as a pain the the proverbial rear. It means then y will no longer be able to pay easily without authenticating their payment through a second channel – tapping in your card details, or even using stored card details will no longer be sufficient.

Some sites may have already implemented clever ways to identify you at log in, for instance your computer or mobile may be recognised as a trusted device. However for most transactions you’ll be forced to use chip and pin style device (although this may be your mobile) or respond to a text message. For consumers, this means if you don’t have your mobile phone to hand you can’t complete a transaction.

3 Ways consumers can handle Payment Services Directive 2 payments

  1. Many banks have a banking app and when you make a payment you’ll be promoted to log into your banking app to confirm the payment. This can be pretty seamless for both website payments and payments through shopping apps.
  2. Your bank may have issued you with a physical one time passcode generator or PIN card reader. If you opt to identify yourself this way then you’ll need to generate a one time code from your passcode generator and enter it into the payment flow.
  3. Possibly the simplest for most consumers is the good old fashioned text message where a code is sent to your mobile which you then enter into the website you are purchasing from. However, in areas with patchy mobile phone signals waiting for a text message is frustrating, especially if the website page has timed out by the time the code has arrived. If you’re buying on WiFi and don’t have a mobile signal avoid this method and use one of the alternatives above when possible.

Whether you are in favour of SCA or view it as a nuisance, as a consumer you’re not getting a choice so will have to quickly be accustomed to an additional step whenever you try to make an online purchase.

PSD2 for retailers

As a retailer, you should be monitoring your abandoned cart rate closely as you may see more transactions dropping out due to SCA than in the past. There’s not a lot you can do about this other than test purchases to ensure your PSD2 flow is as seamless as possible, but you’ll want to know how it is impacting conversion rates and perhaps consider alternative payment providers who can make authentication easier for customers – PayPal and Amazon Pay are both possibilities that marketplace sellers will find easy to set up, but many other payment providers are available.


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