PSD2

What is PSD2?

The PSD2 (Payment Services Directive 2) is the second European Payment Services Directive, a regulation that governs electronic payment services within the European Union. It came into effect on January 1, 2021 and represented a profound change for both users and merchants, who had to adapt to new security and transparency measures.

Its main objective is to strengthen security in digital payments and protect consumers against fraud. This directive replaces the first PSD from 2007, which had become obsolete due to the evolution of ecommerce and new payment methods.

SCA: enhanced security in digital payments

One of the key innovations of PSD2 is the introduction of Strong Customer Authentication (SCA). This measure requires verifying the user’s identity by fulfilling at least two of the following three elements:

• Something the user possesses (their mobile phone)
• Something the user knows (a PIN or password)
• Something inherent to the user (fingerprint or facial recognition)

This verification applies to all online purchases within the European Union or whenever a user enters payment details for future transactions, such as trial subscription payments.

New players in the payment ecosystem

PSD2 also encourages the emergence of new actors in the payment system, known as Third Party Providers (TPP). 

These are third-party service providers that can operate on behalf of the customer, always with their consent, giving rise to the concept of open banking.

With this openness, barriers are removed for new tech companies to offer innovative financial solutions, fostering greater competition and better services for users.

Among the new types of providers regulated by PSD2, two are especially important:

• Account Information Service Providers (AISP): allow access to information from the user’s different bank accounts, always with prior authorization.
• Payment Initiation Service Providers (PISP): allow payments directly from the consumer’s account to the merchant’s account.

These providers must comply with the same security standards as banks and traditional payment institutions to ensure full customer protection.

PSD2 exceptions

The new European regulation includes certain exempt transactions:

• Low-risk transactions, when the fraud rate is controlled.
• Low-value transactions, as long as the amount is equal to or less than €30, the cumulative exempt amount is €100 or less, or the total number of exempt transactions is 5 or fewer.
• Recurring transactions, with the same amount and payment method.
• Transactions from merchants on a customer’s whitelist.
• Transactions initiated by phone, email, or regular mail.
• Corporate card payments.
• Payments outside the European Union.

How PSD2 affects ecommerce

The application of PSD2 is mandatory for all online businesses selling products in the European Union. Initially, its implementation reduced conversion rates due to user unfamiliarity, but today, companies specializing in digital payments ensure full compliance without affecting the shopping experience.

PaynoPain meets all PSD2 requirements, making the purchase process fast and fully trustworthy for customers. Its easy integration with ecommerce payment platform, security guarantees (PCI certification, 3D Secure authentications, and intelligent anti-fraud system), and focus on creating a highly intuitive and simple user experience ensure higher conversion rates.

PSD2 and recurring subscription payments

For businesses that manage their products or services through recurring payment platforms (monthly, quarterly, or similar subscriptions), the user only needs to authenticate the first payment. Subsequent charges are exempt if the following conditions are met:

• Same amount and frequency
• Same payment method
• Same beneficiary

Benefits of PSD2

PSD2 provides several advantages for both consumers and merchants:

Greater security

Two of the three SCA factors are required, reducing online fraud and increasing user confidence in digital payments.

Faster payments 

Payment execution times are reduced, with transactions completed immediately once authorized.

Immediate correction of unauthorized transactions

The user’s liability for unauthorized payments is reduced to €50 (previously €150) before notification.

Greater control over financial data

Consumers can share financial information with third parties, consolidating their accounts on a single platform for easier management.