What is the impact of PSD2 on e-commerce?
There are three factors that companies consider important when making online payments: they must be fast, reliable and secure.
Speed and safety seem to compete the most. The fewer verification steps you use, the more customers complete the checkout process and purchase products. But omitting security involves improper costs and the risk of fraud. This has consequences for cash flow and customer confidence;
The Payment Service Providers Directive (PSD) drawn up in 2007 addresses these concerns (partly).
The main objectives of PSD: to increase competition in the payment services sector, and to stimulate innovation in the payment industry by improving the security of card payments. Keeping processing steps to a minimum also makes transactions faster.
PSD2 is the updated version of PSD, and focuses on strong customer authentication (strong customer authentication – SCA) in electronic payments.
What does PSD2 mean for companies?
For e-commerce companies operating within the European Economic Being room active, compliance with PSD2 is mandatory. The number of rejected and failed transactions may increase if the Directive is not followed. In addition, your bank can also force you to comply, in order to meet its own compliance obligations.
Fini les suppléments pour les cartes de crédit
It used to be common for companies in Europe to pass on the processing fee (2% to 3%) for credit cards to the customer. But not anymore. Under PSD2, companies are not allowed to charge extra costs for any payment method, including payments with Visa and MasterCard.
Enabling Strong Customer Authentication (SCA)
Strong customer authentication is required. During transactions, you must provide two-factor authentication to the card issuers. The SCA policy states that you must verify the identity of your customers using three elements:
- Something that only the user owns (credit card, smart card, or phone)
- Une information que seul l'utilisateur connaît (PIN ou mot de passe)
- Something that uniquely identifies the user (facial scan or fingerprint)
What can you expect after compliance?
The introduction of a new payment policy is not without its teething troubles. After the introduction of PSD2, you will probably see a downward trend in your cash flow statement. Credit card processors will not stop charging 2% to 3% just because you are no longer allowed to pass the costs on to your customers. So if you stop doing this, you’ll either have to pay the fees yourself or raise your prices.
The first option will affect your profit margins, although probably only in the short term. Option two could help you sell less, especially if your business competes on price.
In the long run, you should see an increase in sales as customers experience online shopping as safer. As PSD2 becomes standard, eventually the payment costs will be pushed down over time by innovations and new products.
Who must comply with PDS2?
Almost everyone who does “something” with online payments has to deal with the new PSD2 directive. If your e-commerce business uses AISPs (account information service providers), ASPSPs (account servicing payment service providers), PISPs (payment initiation service providers) or TPPs (third-party providers), you will notice that there are new requirements on your get off.
There are a few exceptions.
The PSD2 guideline does not apply to:
Recurring payments such as SEPA direct debits, as the customer is already authenticated at registration.
- Transactions under 30 euros.
- Transactions originating from outside the EU. PSD2 still applies to transactions from the UK.
- Transactions initiated by the company (variable subscriptions).
- Transactions initiated by mail or telephone.
- Anonymous transactions (gift cards).
What can my customers expect? The impact of PSD2 on the customer experience
The most common way for customers to verify their identity is with a password and verification code sent to their phone. Everyone with a smartphone is used to this process.
Disruption during checkout could lead to a sub-optimal customer experience, especially for young customers for whom speed outweighs safety. At first, you may notice that shopping carts are abandoned more often. But hang in there, because as PSD2 moves further into the European e-commerce world, customers will become accustomed to the new requirements and conversion rates will rise again.
On the customer side, real-time risk analysis means that lower-risk transactions typically don’t require additional authentication. The customer also runs less risk of identity fraud due to a stolen card.
What is the impact of PSD2 on companies with payment requests?
A payment request is a digital request from the payee to the payer on his telephone. If the payer agrees, the money is transferred to the payee’s account. This makes transactions easier by reducing the number of steps required to complete them. Your company benefits from payment requests in several ways:
- Payment requests do not incur any costs, as is the case with contactless payment
- Payment requests reduce the risk of failed payments
- Competitive advantage through a better customer experience
What does the payment request flow look like?
The payment request flow follows the steps below:
Étape 1 : Paiement
During the checkout, the customer chooses his bank.
Step 2: Start payment request
A secure payment request is sent to the bank for verification and processing.
Étape 3 : Authentification
The customer authenticates with his bank.
Étape 4 : Validation
The side approves the payment using security methods such as voice recognition or Touch ID.
Step 5: Confirmation
The seller receives a message that the transaction has been verified.
Étape 6 : Paiement
The seller’s account receives the specific amount from the customer’s account, and the transaction flow is completed.
Offer your online customers PSD2-compliant transactions
Most Mollie méthodes de paiement, such as Apple Pay, Giropay, Klarna and PayPal already to SCA. In addition, Mollie supports 3D Secure, a newer security protocol for bank and credit cards used in Europe.
This means you can focus on running and growing your business without having to monitor the compliance of your incoming and outgoing payments. Find out how you can start secure payments dès aujourd'hui.