PSD2: Paving the way for safer online payments
From gadgets to groceries, you can buy nearly everything you could want online these days. As a result, e-commerce in Europe is thriving, with orders increasing 9.4% over the past year, according to Postnord.
When it comes to shopping online, though, card payments prevail as a popular payment method in many markets, despite their drawbacks.
The expiring relevance of credit cards
First off, cards are inconvenient in today’s mobile landscape. While e-commerce has evolved to reflect our on-the-go lifestyles, credit cards have remained essentially unchanged since their conception. When on the move, for example, it’s inconvenient to fish for your card and type in long strings of payment information, including card numbers, expiry dates and CVV codes.
Secondly, credit and debit cards pose serious problems in terms of data security. Back in the days, fraud and criminal activities happened when a person physically intruded and stole something. Nowadays, fraud predominantly occurs online. The connected world has made it relatively easy to commit crimes, and anonymously, at that. Fraudsters might not come from your home country but from the other side of the world, which makes it practically impossible for police to investigate and catch them.
Today, large data breaches happen frequently. One recent example is the British Airways data breach in 2018, where hackers stole 245,000 card details. Research by cybersecurity firms Flashpoint and Risk IQ found that the hackers were charging between $9 and $50 for each card’s worth of information.
Not surprisingly, as card details and other sensitive information are readily available for fraudsters online, card-not-present (CNP) fraud has seen an extreme increase over the past years. The growth is especially prominent in markets where card payments comprise a large share of total payments, for example, the US. CNP fraud costs roughly €1.8 billion in Europe every year. In Sweden alone, CNP fraud has increased by 269% in the past six years and is now growing by 40% per annum.
Governments step in
Skyrocketing fraud has galvanized governments all around the world to impose legislation to protect citizens. In the European Union, we’ve seen PSD2 take hold, which requires a majority of the safe online payments to use two-factor authentication (2FA) for online purchases. This means payments are safer as they must be authenticated using at least two of the following three factors:
Paving the way for alternative payments
Not only does PSD2 place more stringent security standards on card transactions, making them even less convenient than they already were, but it encourages third-party payment services to jump in and develop faster, cheaper and more secure online payment alternatives.
One method particularly poised for growth is online banking payments, which let consumers pay directly from their bank account with no middle man like credit or an e-wallet.
Trustly is proud to be one of Europe’s leading online bank payment provider and entirely PSD2-compliant. As a result, consumers can rest easy knowing that their payments are fraud-proof, while merchants can eliminate costs related to chargebacks and lost revenue due to expiring cards.
Want to learn more about how you can offer safer online payments? Visit trustly.com/ecommerce.