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Europe’s new banking rules: opportunity to improve fraud prevention

Source: Information Age

The bottom line is that the PSD2 is coming, and is set to shake-up the payments industry like never before. Online merchants and their PSPs need to start thinking clearly about how best to comply with the new provisions in a way which won’t affect the bottom line

Over the past few years European regulators have been busy – very busy – drafting sweeping new payments legislation. The result of their efforts, the Second Payment Services Directive (PSD2), will represent one of the most disruptive laws of its kind ever introduced when enacted by Member States before 13 January 2018.

The new rules will have a far-reaching impact on banks, payment service providers (PSPs) and online merchants, particularly in terms of new requirements around customer authentication.

Yet rather than see this as another unwelcome regulatory obstacle, industry players should grasp the opportunity to implement best-in-class risk-based authentication systems. Doing so will help them meet the PSD2 requirements, cut fraud and offer customers the best, friction-free experience possible: a win-win all round.

The PSD2 cometh

The PSD2 springs from a desire to improve consumer protection, boost innovation and foster greater competition in the European Union. It’s a response to a rapidly changing payments landscape in which consumers are increasingly demanding slick but secure click-and-pay experiences, while merchants are looking for new payment methods to support omnichannel retail.

Add to this the new breed of fast-moving fintech firms challenging established banks with innovative services and you have a market demanding updated regulations. That’s never been a problem for the European Commission, which sees effective payments as the key to unlocking the value of a true single market across the region.

So what exactly does the PSD2 introduce? Broadly speaking it will aim to make it easier to use mobile and fixed internet payment services while protecting consumers against fraud and other abuses, strengthening consumer rights and promoting the European Banking Authority (EBA) as the main supervisory body in charge of technical standards. More specifically, two…

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