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Fraud in remote payments, such as online transactions, has long been a concern. PSD2 looks to tackle this through better authentication of payment transactions. Responsibility for payment security must be managed by payment service providers. PSD2 introduces strong customer authentication as the means to do this. Strong customer authentication often means that consumers must perform additional steps or provide additional information — adding friction to the customer journey. Customers don’t like delayed or difficult payment processes and PSPs who fail to handle the process well could lose customers. Additional checks can add cost to the payment process as many checks are charged on a per use basis.
PSD2 allows exemptions from strong customer authentication for those who can keep their fraud levels under specified reference fraud rates. This allows payments under €500 to be secured using transaction risk analysis. The lower a PSP can keep their fraud rates, the more they will be able to use transaction risk analysis to secure payments. Using transaction risk analysis will help the PSP to lower friction in the customer payment process, improve customer service and keep the cost of securing payments lower.
Managing payment security for PSD2 will have implications for consumers who are using banking and card services to make payments. When strong customer authentication needs to be used or when authentication fails, banks need to communicate effectively with their customers. This means providing customers with the information and instruction they need at the appropriate time using the right channel. Payment service providers that don’t manage the customer communications process well could lose customers as a result.
FICO has developed an integrated approach to managing fraud for PSD2, incorporating rules and profiles based on PSD2-specific parameters with innovative machine learning techniques. This allows your fraud operations to rapidly adapt to emerging fraud trends. Information is fed back into the models so they are constantly developing to better support you. FICO® Customer Communications Services is integrated with the FICO® Falcon® Platform to provide two-way communication with customers. This keeps them informed and provides information back from them, that can, in turn, be used to enhance fraud detection. Models can be further enhanced with data shared with other PSPs in our fraud consortia so that your fraud detection is enhanced with more relevant data.
To help you to comply with PSD2, continue to adapt to evolving fraud scenarios and make the most of the opportunities that open banking brings, we offer a range of services, including:
Prepare with expert advisors
Protect with a proven fraud detection solution
Adapt and futureproof with machine learning
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