The Payment Services Directive 2 (PSD2) European ecommerce rules to tighten up the security of online checkout threaten to make buying things on mobile – and on desktop – much more time consuming and could see an end to all forms of express checkout. But they could be a boon for charge to mobile.
The European Banking Authority (EBA) has brought forward proposals for how it will implement what is called strong customer authentication (SCA). The plans include a “one size fits all” approach where every online transaction over €10 will require additional steps at checkout such as entering passwords, codes or using a card reader.
Independent consumer research carried out in five European countries on behalf of Visa, highlighted that 95% of European consumers spend more than €10 when shopping online, via mobile, apps and desktop, meaning that these measures would affect millions of shoppers.
These steps would be felt most strongly in the UK, however, as UK consumers are the most prolific online shoppers of those markets surveyed – 63% regularly shop online, compared with the European average of 51%.
For UK online shoppers and retailers, the changes are likely to lead to more frustration and more cart abandonment. In fact, the survey found that more than half (52%) of consumers would abandon purchases if more steps were added to the checkout.
In practical terms, the proposals would mean an end to express online checkouts for consumers. This would includes one-click checkouts even at stores where consumers shop regularly, and no more fast, automatic in-app payments where cards are already stored. Across Europe, express online checkouts currently make up half of all today’s total e-commerce sales, according to Visa’s data.
However, PSD 2 has a hard-won telecoms exemption clause in it that will make charge to mobile mobile payments from a registered device easy to do and for purchases such as carparking and the like, charge to mobile suddenly looks much more attractive.
According to Kevin Jenkins, UK & Ireland Managing Director at Visa: “The extra steps of authentication will be required for every online purchase made using web-based and mobile wallet services through either a browser or retailer’s app. In practice, this means no more express checkouts or quick in-app payments from mobile.”
Jones continues: “Our recent Digital Payments study revealed that 65% of UK consumers cited greater convenience as a key benefit of using wallet services, whilst half pointed to one-click payments as a benefit.”
Rory Maguire, MD of AIME, says: “I think the EBA “one size fits all approach” is OTT. Amazon for example allow one-click payments only for logged in users with delivery to the registered address. Change the address (where fraud occurs) and they take you through a new security loop. They could improve the security with a text based PIN loop, but it depends if the EBA will allow the one-click to remain while the users delivery details are unchanged.”
It will however affect payments where two-factor authentication is not present such as car parking and the opportunities for mobile payments to provide a more convenient payment method start to emerge.
“There is a “however” however,|” says Maguire. “and that is the rise of the “payment denial” that is now seriously affecting Charge to Mobile. One network put in a no-quibble refund for any of their consumers who complain about a charge to their bill. Calls have shot through the roof . The MNOs have to put in place irrefutable payment mechanisms and be harder on their consumers who try the denial otherwise parking will never fly.”