E-commerce Merchants Are Waking up to the Reality of PSD2

Following various setbacks in the implementation of and attempts to protect the European payments ecosystem, compliance with the Payment Services Directive 2 (PSD2) will be much more difficult for European e-commerce operators than originally anticipated. has proven difficult. as revealed by the latest research in risky.

Nearly half of European and UK-based e-commerce merchants still struggle to comply with PSD2, according to fraud management platform research, despite the regulation being fully enforced following the extended deadline. It became clear that

The study was centered around a survey of 207 decision makers from European and UK organizations. forester consultingfound that 45% of respondents have met regulatory minimum requirements or resolved issues related to PSD2 rollouts.

And despite expectations that PSD2 will reduce fraud and make payments more secure, 39% of merchants reported an increase in fraudulent chargebacks on 3DS-authenticated transactions and an increase in overall fraud rates. acknowledged that it had a negative impact on

A long road to optimization

With the aim of making the European payment ecosystem safer, more integrated, open and convenient, PSD2 was first conceived in 2015 and its most famous feature is Strong Customer Authentication (SCA). was introduced. Card does not exist.

But now, more than a year after the one-year anniversary of the deadline for enforcement across the European Economic Area, research shows that nearly half of organizations are either compliant with baseline PSD2 requirements or are still in troubleshooting mode. , it became clear that they were trying to solve a technical or integration problem. Your way to an optimized payment strategy.

The majority of survey respondents are moving towards optimizing their payment streams, he said. Roman Korobkov, Riskified’s PSD2 domain expert. But those who are not yet ready are at a turning point in how they transform their payment strategies.

These e-commerce merchants are trying to work within these new guidelines while trying to establish a balance between user experience, security, and compliance, continues Korobkov. But they are trying to bring more transparency across the ecosystem to make things work.

fraud continues to grow

A majority of those surveyed revealed that the costs associated with fraud prevention increased after PSD2 took effect.

According to the survey, 43% report that costs have risen across the board, with the exception of the 3DS price, of which 57% said they spent a quarter of what they spent pre-PSD2. said to have increased.

But while costs are rising, merchants are still seeing an increase in fraudulent chargebacks on authenticated orders, negatively impacting overall fraud rates.

The industry standard for SCA, 3DS, has proven efficient for many merchants, but it is not a one-size-fits-all solution and over-reliance on it can be misleading, Korobkov said. I warn you.

Technology is evolving, but so are scammers, coming up with multiple ways to circumvent security protocols. Both trends are frictionless and challenging. , it’s all about using the right data and the solutions and technologies available in the market to build the right strategy for your business needs.”

lock-in and restrictions

80% of survey respondents believe that exemptions enabled by anti-fraud partners or payment service providers (PSPs) have proven to be an effective means of preventing orders from colliding with SCA and 60% of merchants reported: This way you can prevent more than half of your orders from being compliant with her SCA.

That said, some e-commerce decision makers also share that they face exemption-related restrictions. No further exemptions are possible due to the overall limit set by

Surveyed decision makers also revealed that it is difficult to leverage the solutions available in the market because they are constrained by the PSP payments ecosystem. 31% say they are tied to specific tools provided by their payment partners.

PSPs provide 3DS solutions and exemption engines and should be ready to open up the ecosystem and work with solution providers to optimize the payment process, says Korobkov.

Combined with greater flexibility, cost optimization, higher approval rates, and more orders exempted from SCA, e-commerce merchants will have access to more data to find partners and solutions tailored to their specific needs. You can choose for yourself.”

What is PSD2 missing?

Despite the concerns raised in this study, we also identified several potential solutions to help merchants comply with regulations while reducing fraud rates and increasing revenue.

Respondents revealed that more data and transparency would help advance their organization’s PSD2 strategy.

• 65% wanted more transparency on payment processing fees
• 61% want regular updates on market performance
• 59% requested a review of solutions available on the market to help optimize PSD2 compliance

These findings highlight the need for better communication and transparency within the fraud and payments ecosystem to help merchants evolve their strategies and move from troubleshooting to optimizing. I’m here.

And although merchants are not PSD2-tolerant, they believe it has the potential to improve their business and are ready to build a strategy around PSD2 once the system becomes more transparent. It is also worth noting that

Compliance itself is not a key goal. Respondents surveyed believe that gaining a competitive advantage by optimizing payment flows under PSD2 will be a future strategy, along with better customer experience, higher conversion rates, and higher customer retention. said to be important for