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Award-winning payments specialist Elavon Europe explains the pan-European changes that have made the way we pay safer, faster and easier than ever before.
The movement of money is a vital source of trade. In the digital age and in preparation for the potential of the metaverse, the payment landscape is undergoing digital transformation and changing faster than ever before.
As the pandemic accelerated the need for businesses and consumers to adapt to a contactless and cashless approach, the payments industry across Europe was already undergoing its biggest change in more than a decade.
The most recent of these changes, called the Second Payment Services Directive, or PSD2, came into force in the UK in March. It was designed by the European Commission with the aim of making modern cross-border payments easier, faster and safer for everyone involved, and the effect is now becoming clearer.
The core of the policy is strong client authentication (SCA). While every company has had to adopt the changes to the directive, this is what consumers are likely to notice, if at all. If you’ve recently purchased something via your smartphone, for example, you’ve gone through additional verification steps. They confirm that you really are you.
You must now complete two of the three steps to pass the SCA. You must show something that only you, the real user, can know (password or PIN); something that only you, as the real user, own (an asset like a smartphone) or something that defines who you are (a fingerprint or facial recognition).
The result is that from the end of March 2022 when the update is adopted in the UK, when you buy something online you should already be facing an SCA.
Growing trust in e-commerce
“We are all also users and we all communicate on the web. I think what PSD2 has done is given confidence to the market,” says Rob Evans, PSD2 project manager at award-winning payments specialist Elavon Europe. “There are a lot of people who are now more aware of their information, their data, who stores it, how it is stored and whether their card data is handled securely.
“PSD2 has been successful in ensuring this happens now. So when you go online and buy something and get that confirmation via your phone, tablet or device – wherever you are – you have more confidence that your data is safe.
“That will be increasingly important as we move forward in e-commerce and the digital space.”
As already stated, the aim of the directive is to make payments faster, easier and more secure for everyone – including businesses. But this does not mean that the changes were easy or quick, because the gradual introduction lasted four years.
Your support for businesses through these changes led to Elavon Europe being named Best Business Service at the UK Card and Payment Awards 2022. Industry experts guided customers through the changes, making them as smooth and painless as possible. The results were excellent.
In addition to improving consumer confidence, initial data comparing the first few months post-implementation with the previous period shows that fraud rates for Elavon Europe’s business customers have fallen by 89%*.
“While we cannot disclose commercially sensitive information, the results are particularly impressive – in part because Elavon specializes in providing secure payments for some of the most fraud-prone industries, including retail, hospitality, airlines and travel.” says Federico Gaffney, who worked with industry regulators within the Elavon Europe PSD2 project team.
The associated costs and fraud risks for businesses have also improved. “For our clients, that doesn’t just mean less loss,” says Gaffney. “Fraud ultimately or primarily affects business, and this increases the cost of accepting payments. The cost of fraud is a cost, but also a loss. So less fraud is a good thing for everyone, including cardholders – our clients’ customers.”
While all of these changes have been implemented, approval rates for Elavon’s customers have also consistently remained above 95%.
Maximize online sales; minimize fraud
The new law, however, created some friction – mostly in the treasury. “Abandonment, where consumers leave before completing their online purchase, is inevitable as cardholders become accustomed to new challenges and additional authentication steps,” says Gaffney. “We hope this will continue to improve as the new way of online shopping becomes embedded in our lives and as we become more accustomed to it.”
To reduce the extra steps before checkout that exacerbate cart abandonment, new innovations have emerged. Among them is transaction risk analysis or TRA.
The TRA allows businesses with a high volume of low-risk payments to apply strong exemptions from customer authentication for qualifying transactions up to €500 or equivalent. This reduces friction to improve online sales and minimize fraud. “While the industry norm for exemptions is between €100 and €250, Elavon Europe is able to offer exemptions of €500 thanks to our below-average fraud rates and experience in this area,” says Evans.
Originally published on Business Reporter