What Businesses Should Know About PSD3

Initially proposed as a revision of the Payment Services Directive Two (PSD2), Payment Services and Electronic Money Services (PSD3) is a European Union (EU) directive designed to protect users’ rights and privacy as they make the most of the payment industry.

Generally, PSD3 stipulates the authorization and supervision requirements of non-bank payment service providers (PSPs). Its primary objective is to drive innovation and competition in the finance industry. And as a merchant hoping to benefit from it fully, you should learn everything about it.

Not sure where to start? We’ve got you! Here are a few important things to know about PSD3.

You Might Be Safer

With the arrival of PSD3, your customers might now enjoy safer buying experiences. Typically, the directive changes how strong customer authentication (SCA) works.

Businesses are now required to divulge more information to facilitate the monitoring of their behavioral and environmental factors that might contribute to fraud. These include their specific locations, transaction history, and spending habits.

Again, PSD3 may also shift liability in case of online fraud. If payment and technical service providers fail to leverage SCA, they will be held accountable when payers are defrauded. This encourages them to provide quality services at all times.

But of course, this doesn’t mean you, as the payer, should be reckless. If you’re fraudulent or negligent, you will be held responsible for fraud.

There are Exceptions

PSD3 exempts merchant-initiated transactions (MIT) like subscriptions from SCA. As a result, only the first transactions require applying the authentication method. This means merchants and business owners can enjoy them without further authenticating themselves.

However, SCA exemptions don’t apply to certain people, such as older adults, non-tech-savvy users, and those with disabilities. Service providers need to avail reliable authentication methods that don’t necessarily depend on smartphones.

Keep these points in mind as you prepare to get the most out of PSD3. Thanks to this writeup, making electronic payments in the EU can be safer and more convenient.