Shortcut to Meeting PSD2 SCA Requirements – How Can Vendors Achieve SCA Compliance?

The European Union’s PSD2 (Payment Services Directive Part II) came into effect way back in 2018. The new set of directives promised to bring clear changes to the European online payments industry. However, the implementation of these regulations has been very slow. The original deadline of September 14, 2019, wasn’t met by many payment facilitators and online vendors. As a result, many payment service providers (PSPs) and online sellers are still not compliant with the latest Secure Customer Authentication rules (SCA) under the PSD2.

The Strong Customer Authentication (SCA) rules were set to go live on December 31, 2020, in most of the European countries. But, even with this delayed deadline in place, many online businesses, especially in countries like the UK, haven’t been able to implement SCA protocols on their business platforms. If these online vendors and PSPs want to conduct business in countries within the European Economic Area (EEA), they should be investing in solutions that help them achieve SCA compliance.

The Need for Instant Implementation of Strong Customer Authentication Rules

PSD2 poses both opportunities and challenges for online merchants. Achieving PSD2 compliance will enable online sellers to embrace the latest changes in global payment technologies and open the doors of their businesses to online shoppers who demand security and frictionless online shopping experiences. On the other hand, not meeting the latest PSD and SCA requirements will leave online vendors exposed to various complexities.

The ever-changing online payments landscape will directly impact their chances of achieving business growth. More importantly, online vendors that aren’t SCA and PSD2-compliant will have poorer authorization rates. All payments and transactions on their platforms will have to go through extensive varieties of checks against large data sets of issuer data, compliance-related data, and transactional data.

These increased numbers of checks may make their online shopping platforms extremely inefficient. A regular shopper on your online platform doesn’t need or deserve to be authorized multiple times. When every shopper on your platform has to go through transaction processes that are full of friction, unnecessary checks, and verification processes, your ability to attract shoppers will dwindle.

The best way to prepare your online business platforms for the implications of PSD2 is partnering with experts of online payment gateway solutions who can help online vendors meet PSD2 SCA Requirements.

What are Online Payment Gateway Solutions and How Can They Help Vendors Achieve PSD2 Compliance? 

To tackle the uncertainties that online vendors are facing with the rollout of the PSD2 and SCA requirements, leading online payment gateway providers have created transaction assessment tools powered by Machine Learning (ML) algorithms. These configurable online transaction assessment tools evaluate each and every transaction on the platform.

Each transaction is reviewed by these automated tools to check whether it qualifies for an exemption. For instance, repeat orders (that cost very little) from long-term shoppers of the platform don’t need to be repeatedly assessed in accordance with SCA requirements. Such transactions and shoppers can be exempted from the multi-step verification processes. However, with the best AI-powered online transaction assessment tools, evaluations go way beyond just exemptions.

These tools can identify user patterns and behaviors. They can immediately inspect whether a user is engaging in fraudulent activities or not. These tools then act against them in real-time, preventing them from making orders. With such “Authentication Engines,” scaling the overall performance and security of an online shopping platform becomes much easier.

Online vendors are also able to manage large transaction volumes with relative ease, knowing that their online transaction assessment tools are using machine learning intelligence to scrutinize every transaction. By using these tools, online vendors can essentially streamline their payment routing and acceptance processes, making them safer, more resilient to cyber fraud, user-friendlier, and totally compliant with the latest PSD2 and SCA requirements.

• Merchants can make data-driven decisions based on the insights collected by their online transaction assessment tools.
• They can offer friction-free user experiences to shoppers while reducing costs. For instance, whenever SCA regulations allow, these tools automatically skip authentication processes so that online shoppers don’t face constant interruptions on the platform’s checkout page.
• Even with less friction when shoppers check out, all transactions are still geared towards achieving PSD2 authorization. Applying SCA for customer-initiated payments becomes much easier with these ML-powered tools. These tools can easily identify credit/debit cards issued outside of the European Economic Area and make instant acceptance/rejection decisions.
• The best real-time PSD2 decision engines are also customizable. Online vendors can receive real-time reports on their transactions. Data from these transactions can be assessed by the sellers to cut down risks or spot new opportunities.

Over 300 FinTech companies have joined the ‘open banking ecosystem’ that was created by the passing of the PSD2 regulations in 2018. These online payment gateway tools powered by machine learning capabilities offer small-scale vendors the perfect chance to achieve PSD2 and SCA compliance and join the new world of user-friendly online payments in 2021.