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Revised Directive on Payment Services (PSD2) poses barrier to the digital single market, expert warns

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Following the adoption of the second Directive on Payment Services (PSD2), the European Banking Authority (EBA) has been mandated to issue secondary rules on payment security. Based on the draft EBA rules (published on August 12) consumers purchasing services and goods online will be forced to go through strict authentication procedures before being able to access and use their preferred online payment instrument.

These requirements will apply also to mobile payments and – according to the EBA draft rules – regardless of the actual risk posed by the specific transaction or payment instrument.

“No more will the payee check-out within one or two clicks but will undergo a cumbersome procedure of strong authentication which will makes online shopping inherently inconvenient”, notes Oliver Prothmann from Choice in eCommerce.

According to Choice in eCommerce this is an antiquated process which does not necessarily lead to higher security. Risk management and targeted customer authentication are more effective means to ensure secure electronic payments and should therefore be rather considered in the PSD2. “Today, we have intelligent systems which are able to detect many parameters of a new or recurring customer. The security processes therefore to decide upon how to specifically authenticate the customer run in the background and dynamically, rather than inflexible and leave all customers to a laborious process of checking out.”, summarises Oliver Prothmann.

Choice in eCommerce supports requirement of high security standards with regards to electronic payment. However, a certain commensurability should be preserved. Online retail businesses will have to bear the load at first. Strong customer authentication processes will eventually raise the costs of services. “Rising costs will have to be compensated somehow. At the end of the day, it is the consumer who will pay for the supposed security.”

Choice in eCommerce welcomes very much the support of the European Union to further develop an integrated internal market for safe electronic payments. “Electronic payments are the means to do business online and thus indispensable”, states Oliver Prothmann. “We see a trend towards more regulative directives in the digital single market which are counterproductive and impose unnecessary barriers on SMEs to grow and expand cross border”, he warns. Once all Member States of the European Union implement this Directive, there is the danger of fragmentation of the market. “If electronic payment should be safe in all EU member states, there should be one law for all and not many interpretations of one Directive”, Prothmann points out.

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