Glossary

PSD2

Due to the growth of online shopping and online payments. The European Union created legislation in order to protect consumers and merchants. That legislation has recently been updated and is called The Payment Services Directive Two (PSD2). This legislation ensures payment providers (card providers, banks, payment facilitators, and more) improve customer authentication processes.

Strong customer authentication (SCA) is a requirement of the EU Revised Directive on Payment Services (PSD2) on payment service providers within the European Economic Area. It requires the increased security on electronic payments, this is done with multi-factor authentication.

Online SCA exemptions include:

Low-value transactions: Exemptions will be granted for transactions under 30 EUR. However, issuers may demand SCA after five transactions or in case the aggregated amount exceeds 100 EUR.

Subscription and recurring transactions: Subscription or recurring transactions with a fixed amount are exempted from the second transaction onwards. SCA is required with the initial transaction or if the amount changes.

Mail Order and Telephone Orders (MOTO): MOTO transactions are not covered within the new standard.

The Payment Services Directive Two (PSD2) is a piece of European legislation that ensures payment providers (card providers, banks, payment facilitators, and more) improve customer authentication processes, reducing payment fraud. There is also tighter regulation surrounding third-party involvement.

The Payment Services Directive Two (PSD2) gives consumers greater security when making online purchases, it has also created a new type of online payment - Open Banking. Open banking allows for account to account payments.

PSD2 applies to all credit cards.

Further Information: