What is PSD2 and why does it matter?

Payment service providers in the European Union must implement stronger customer authentication as part of PSD2, the second Payment Services Directive.

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What is PSD2 and why does it matter?

What is PSD2?

The second Payment Services Directive, PSD2 for short, is a set of rules and regulations governing payment service providers in the European Union. When it takes effect in 2018, it has the potential to rapidly change the payments industry and how customers interact with vendors.

What will change?

Under the old payments model, purchases made by consumers flow through multiple intermediaries and processors before transactions are completed. The new directive breaks that old model and allows merchants direct access to your bank account, with permission.

PSD2 also introduces measures to improve transaction security, encourage payment innovation, and standardize payments across borders.

What does it mean for you?

With this new age of more open transactions come required security measures known as strong customer authentication (SCA). At a minimum, transactions must be protected with two-factor authentication (2FA) – SCA requires verification by two of three vectors: knowledge, possession, and inherence.

Since PSD2 regulations apply to all purchases over €30, you’ll be hardpressed to find a European consumer who won’t be impacted.

Learn more about how to meet SCA and PSD2 compliance with our ebook.