Fraud & Security Will Your PSD2 Customer Authentication Stop Jenny’s Purchase?

Image from FICO video
Nov282017

In a previous blog I have written about the messaging that is, or rather isn’t happening to consumers around PSD2. We are now seeing some attempts to educate the public, though this is often hidden in the issuing of new terms and conditions for bank accounts, or in media scare stories that suggest a customer data free-for-all.

It wasn’t until I saw the final animation for ‘PSD2 and Jenny’s Washing Machine’ that it really dawned on me how exposed payment service providers will be to accusations of poor customer experience, once Payment Initiation Service Providers (PISPs) are up and running.

I wrote the script for this animation but it wasn’t until I saw the finished animation and ‘Jenny’ selecting her payment method from a screen (it’s at 1:07 if you want to check it out) that it occurred to me just how much scrutiny and direct comparisons could be made between bank account providers and card issuers in the PISP environment.

Imagine you’re buying something online and it’s time to choose how to pay. You can see all your payment methods on one screen, you start to select to pay from your account with “Nono Bank” and then you think, “Hold on – every time I use them I have to scan my thumb, remember the name of my first celebrity crush and backflip through a flaming hoop.”

When customers form the opinion that it’s too difficult to pay using an account, they’ll simply stop doing it. PSPs need to take care to limit the friction they create when securing payments. They need to select Strong Customer Authentication methods that are as invisible as possible to their customers, or secure payments with Transaction Risk Analysis when they can, to limit the amount of fraud authentication they need to do.

Transaction Risk Analysis allows PSPs to secure qualifying payments without deploying the Strong Customer Authentication that disrupts the customers’ journey and is likely to be more costly. To use Transaction Risk Analysis, PSPs must keep their fraud rates below designated reference rates which will be defined in the PSD2 Regulatory Technical Standards.

PSPs who can accomplish the right levels of fraud authentication have an advantage when it comes to retaining existing customers and attracting new ones. To understand more about when, how and why you need to consider using Transaction Risk Analysis to secure payments take a look at our whitepaper: PSD2 and Transaction Risk Analysis – Why it’s Important to You.

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