The Payment Services Directive 2 (PSD2) was introduced to address changes in consumer behavior and the evolving landscape of payment methods driven by technological advancements and consumer demand. The directive aims to make the payment industry safer and fairer by implementing several key measures:
Enhanced Security:
PSD2 mandates Strong Customer Authentication (SCA) to improve the security of electronic payments. This involves multi-factor authentication, which uses at least two of the following: something you know (e.g., password or PIN), something you have (e.g., phone or hardware token), and something you are (e.g., fingerprint or face recognition).
Third-Party Access to Data:
With consumer consent, PSD2 allows third-party payment providers to access banking data through APIs (application programming interfaces). This fosters innovation and competition by enabling new payment services and financial management tools.
Consumer Protection:
PSD2 enhances consumer rights and protections, ensuring that customers are better informed and more secure when making electronic payments.
Benefits for Customers:
Transparency: PSD2 promotes clearer and more transparent payment processes, allowing customers to better understand and manage their finances.
Security: Stronger identity checks during online transactions enhance the safety of customer payments.
Innovation: Customers can benefit from innovative services offered by third-party providers, making financial management more convenient and efficient.