Do ISVs Need To Worry About PSD2?

The Payment Services Directive (PSD2) is a set of new security requirements for electronic payments that went into effect in Europe in this month. These regulations have undoubtedly brough about significant changes in the European payments industry. While these regulations will only be enforced in Europe initially, they may impact the U.S.

What Is PSD2?

PSD2 requires more stringent security restrictions for online payments through multi-factor authentication (MFA). MFA requires banks and other entities to provide third-party payment providers with payee account information if the holder provides consent. According to the requirements, banks that house payee accounts must test online payments originating in Europe with a two-factor authentication method. The new laws require authentication through a password, PIN, or facial recognition. In return, a unique code will be generated for every transaction.

Not all transactions are subjected to these new requirements. For instance, all transactions under 30 euros and all recurring transactions such as subscription services are exempt.

What About ISVs and PSD2?

Once PSD2 regulations are widely adopted in Europe, history dictates fraudsters may target transactions in other regions that do not have the same restrictions, including the U.S. For example, after Europe adopted chip-and-PIN card authentication in the early 2000s, fraud surged in regions that had not yet adopted the technology.

However, there is no indication that ISVs in the U.S. need to worry. The U.S. will likely follow Europe’s example and adopt similar authentication methods. This prospect will allow ISVs to provide customers with a better experience while keeping fraud at bay. Software providers have the opportunity now to find a payments partner that has technology (i.e processing platform) that is easily adaptable for industry changes.  ISVs have enough to worry about, payment security infrastructure details shouldn’t be one of them.

Work With an ISV Payments Expert

Whether its PCI compliance, PSD2, or any other changes that emerge within the payments landscape, Paragon Payment Solutions is your go to for all things payments.