Overview

Under the new regulation, merchants in the EU must meet SCA (Strong Customer Authentication) requirements and present their customers with a 3DS2 (3D Secure 2) flow for online purchases. This allows the merchants to securely 'authenticate' both the customer’s identity and the validity of the credit card in use. 

This article shares information about the announcement of PSD2 (Payment Services Directive 2), which is a new electronic payment requirement for merchants operating in the European Union (EU). 

Information

Important: Customers should confirm with their banks if they have implemented and require PDS2 for payments. As long as the banks have not implemented if there is no impact on BiznessApps not doing so. 

Refer to the sections below to learn more about this regulation, the transaction types affected by it, and the current compliance status of Payment Gateways for it. 

European PSD2, SCA, and 3DS2 Requirements

PSD2 is the recent EU regulation that went into effect on September 14, 2019. It governs electronic and other non-cash payments. The primary provision of PSD2 is to ensure an SCA (Strong Customer Authentication) process that makes online payments secure and reduces fraud while increasing authorization rates. 

3DS2 is an authentication protocol designed by credit card companies such as Visa, Mastercard, American Express for additional security, and also to meet SCA requirements.

The EU had mandated SCA compliance by September 14, 2019. However, it has been recently extended in the UK by 18 months, and then on 16 October 2019, the European Banking Authority further announced that the new SCA requirements should be fully enforced by 31 December 2020.

Important:  Check Stripe Payment Gateway Compliancy with Strong Customer Authentication SCA for more information about SCA and the Stripe Payment Gateway

Which Type of Transactions Does PSD2 Apply To?

Most alternative payment methods, such as PayPal, AmazonPay, and ApplePay, are PSD2-compliant and meet SCA requirements. Therefore, the main impact of PSD2 and SCA is on credit card transactions. Refer below to learn more about the transactions that PSD2 applies to and does not apply to: 

• PSD2 does not apply to Merchant Initiated Transactions (MIT) like recurring subscription charges.
• PSD2 applies to the initial sign-up transaction and any one-time transactions. Merchants must present the 3DS flow on these transactions to satisfy SCA.
• PSD2 applies to all online transactions where both the issuing and acquiring banks are located in the European Economic Area (EEA).

Merchants should also be aware that similar regulations are expected to be adopted in Australia and New Zealand in January 2020. Transaction type impacted include payments made via credit cards and alternative payment methods.

Existing Compliance Status of Payment Gateways 

Refer below to learn about the current compliance status of Payment Gateways for PSD2:

BiznessApps Payment Gateways

Other Payment Gateways

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• Stripe Payment Gateway Compliancy with Strong Customer Authentication SCA