By now, you’ve probably heard about the PSD2 abbreviation a few times, but you apart from what you’ve read here and there, you have no idea of what it stands for and most important — how it could impact your business. So today we’re sharing with you the good, the bad and everything you need to know to about the PSD2 authentication.
What is PSD2 in simple terms?
PSD was first adopted in 2007 when the need for a single payment market within the European Union and the need to create a legal framework for a Single Euro Payments Area (SEPA) became stronger. That is why during 2015, the European Parliament approved the PSD2. Its main objectives were to protect the rights of consumers by guaranteeing the security of their personal data as well as boosting the innovation of its previous version.
Why was the Payment Services Directive (PSD2) created?
The first concerns about the additional fees applied by the companies in the card payments (up to 20% in some cases), were expressed by the clients when these charges became a common practice in the travel industry. The situation forced Parliament to take preventive measures in January 2018, which prohibited these surcharges in the European Payment Services Directive (PSD2). The implementation of the new regulation has led companies in all industries to absorb the additional cost of transactions or redirect the cost to the consumer.
PSD2 rules are still changing. How will it affect your business?
Companies might have already implemented the latest requirements, but the change is not over. There is still more to come from PSD2 this year. In fact, PSD2 introduced Strong Customer Authentication (SCA) as part of the September update, which adds an additional layer of security when making electronic payments or transactions. What does this mean for the travel industry? Well here’s two things to take in consideration:
The impact on consumer payments
Fortunately, the new update has not affected contactless functionality, although it now requires two-factor authentication for online purchases or credit transfers. This means that consumers will be asked to provide a password, a PIN code or a mobile phone with biometric capability. This new requirement could affect the travel industry, especially small businesses. The ease of making online reservations has positively boosted the tourism industry but despite the fact that users want to be able to access these platforms in a secure way, they do not want to have to go through an excessively complicated process.
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But this balance between security and user experience is something that requires expert work that not all companies can afford. Travel companies have to work with financial institutions or card providers that offer two-factor authentication and, at the same time, offer a seamless experience that encourages repeat purchases from customers.
The impact on B2B payments
By using virtual cards or Virtual Account Numbers (VANs), travel agencies avoid having to apply SCA, reduce the complexity and cost of making a payment directly to a provider and they are able to improve their operational efficiency. The whole booking process is easier, faster and more secure.
The first surcharge restrictions were published in January 2018 and will be updated by SCA during this year, so it is important to keep abreast of its new rules and adapt your business to these changes to protect companies and consumers in the future and remain competitive. However, it is also vital to do provide your customers with an excellent payment experience that will help facilitate B2B transactions without problems.