Finance Monthly August 2019 Edition

n fact, so little of the PSD2 discussion has revolved around retail that some merchants are still unaware that the regulation will apply to them, while others wonder just what the new rules will mean for their online operations. So, let’s be clear: ignoring PSD2 will not make it go away. Neither will relying on the talk of delays for all or parts of the regulation beyond the regulation’s 14 September deadline - though there will be delays and frameworks for compliance in the UK, as recently announced by the Financial Conduct Authority (FCA), and we expect that more jurisdictions will follow. There is a sense of deja vu in European retailers’ reaction to PSD2. Remember businesses’ response to GDPR as its consumer-privacy requirements were barrelling toward them? It’s not that unfair to characterise some retailers’ GDPR strategy at the time as: “Let’s ignore it and hope it goes away”. However, it didn’t and PSD2 won’t either. But just as forward-thinking enterprises embraced GDPR and turned implementation of the consumer protections into a competitive advantage, smart retailers have the opportunity to do the same with PSD2. In order to turn PSD2 requirements into a competitive advantage, retailers need to find a way to provide seamless customer experiences while still measuring Strong Customer Authentication’s (SCA) three elements of possession, inherence and knowledge, ideally without ever prompting their customers to take additional checkout steps or turning over the checkout flow to the card brands. The infrastructure that will tell the issuing banks that SCA has been completed — think 3D Secure — will be upgraded and improved, but the substance of the regulation and its requirements will be with us going forward. Counting on the regulation’s burden to be eased by the European Banking Authority (EBA) recent opinion, is not a winning strategy. Neither is looking for loopholes through exemptions, whitelists or convoluted payment paths that will move issuers or acquirers out of Many of the conversations about PSD2 and its online security requirements have revolved around the financial sector, with the implications for banking and increased scrutiny on FinTech being the main talking points. That focus is probably correct: when the directive comes into force, it’s expected to increase competition by opening up the payments infrastructure to third- party providers – allowing them to arrange payments for consumers and provide financial products. PSD2 is undoubtedly going to have a major impact on the future of payments in the European Economic Area (EEA), says Stefan Nandzik, VP of Corporate Communications at Signifyd. Yet, big conversations need to be had about the impact PSD2 will have on other industries. E-commerce heavily relies on the payment transactions which PSD2 aims to improve, so why is the sector skirting around it? I “ “ So, let’s be clear: ignoring PSD2 will not make it go away. 19 www.finance-monthly.com FINANCE & BUSINESS - PSD2