Effective September 14, 2019, the Regulatory Technical Standards (RTS) directly related to the Payment Services Directive 2 will be implemented with the objective of reducing fraud rates on online commerce. European e-consumers should therefore be confronted more frequently with an authentication process for their online transactions—a process that will also evolve towards so-called “strong” authentication. As a new step in the customer journey, this double authentication also increases the risk of failed payments. Internet trading in Europe could therefore be deeply affected by these changes and affected businesses, which are not gearing up to these new requirements, could see their conversion rates drop significantly.
Banks and the threat of systematic authentication
This regulatory evolution induces a profound paradigm shift. Banks will now have to support the obligation to reach defined fraud thresholds. In order to be able to meet these thresholds, banks will have the opportunity to require strong authentication on all transactions (except regulatory exception). Thus, this potential friction at the end of the purchasing process could have an impact on the conversion rates of online merchants and in fact on their turnover.
Dalenys’ unique positioning to deal with exemptions
In addition to supporting new authentication methods such as 3D Secure 2 and offering Fraud Premium offers to encourage exemptions, Dalenys wants to help affected businesses to anticipate risks.
To begin with, some exemptions are provided for in the protocol and do not require any particular action by the different payment actors:
☑ Payments to trusted beneficiaries
☑ Payments of less than €30
☑ Recurring payments of the same amount to the same beneficiary
☑ Low risk payment because the merchant fraud rate does not exceed the limited threshold
☑ Contactless payments
For other transactions, Dalenys has a unique market position. In fact, as an Acquirer and a subsidiary of Natixis Payments, Dalenys has a privileged capacity for action, thanks in particular to a 360 ° view of the data and to a unique knowledge of the Issuer data modeling provided by its proximity to BPCE Group. This positioning not only makes it possible to consider exemptions to grant Frictionless, but also to be closer to the decision-makers to advise the merchants.
What to anticipate to prevent transactions from being rejected
As of the fourth quarter of 2019, this evolution of protocol will have an impact on companies that sell on the Internet. On the other hand, the latter may be more or less important, depending on the type of purchase concerned, the merchant’s payment workflow (during or after the payment), or the bank used by the final customer.
Dalenys works hand in hand with Natixis Payments to implement as much as possible a workflow without friction, but some parameters are at the initiative of the merchants. In order for them to be fully aware of these imperatives, even though 80% of European merchants do not seem to have taken the measure of these changes, Dalenys has formed its Payment Managers who are required to steer the maneuver for each merchant individually.
To know to limit the recourse to strong authentication:
☑ Check the data that must (or can be) shared
To enrich the context of the transaction, which will be subject to risk analysis by the Acquirer (TRA – Transaction Risk Analysis) and the issuer (RBA – Risk Based Analysis), and to favor the exemption, the merchant can identify the data—both mandatory and optional— to be sent to the PSP-Acquirer?
☑ Ensure the technical deployment of strong authentication
The Acquirer and the merchant must be able to support the new customer experience provided by the RTS and the transition to version 2.1 of the 3D Secure protocol, as well as the consideration of new data that will be required to finalize the transaction.
☑ Check the positioning of its PSP-Acquirer
Dalenys and its partner NSoftware, for example, have been certified EMVCo on October 16, 2018. This prerequisite is all the more structuring as it is part of Dalenys’ dedicated program for major merchants. Based on collaboration with the issuers, this privileged support encourages a frictionless customer experience through a unique mastery of data modeling, end-to-end TRA processing, and a Premium Fraud Prevention offer.
Check out this infographic to evaluate the risks of your conversion, once the DSP2 protocol has been deployed !