How Delegated Authentication and Payment Authentication work with PSD2


The European Commission has launched a public consultation on the Payment Services Directive (PSD2). PSD2 is an updated version of the Payment Services Directive, the European Union’s rules for online payments. It contains regulations to increase consumer protection, promote innovation in payment services, and strengthen user rights. PSD2 also paved the way for open banking, where payment account data is available to anyone who needs it. Here is a quick overview of what you need to know.

PSD2 extends transparency rules to payments made outside the EU and EEC, known as OLO transactions. It also clarifies the commercial agent exemption, known as the one-leg-out (OLO) transaction. While most payment service providers will handle the new requirements like digital identity verification, merchants who manage their payment gateway must also implement PSD2.

The new Payment Services Directive amends the previous Directives on payment services and promotes greater European integration. The directive is intended to make payment services more accessible to the general public and make it easier for consumers and businesses to access them. This means that consumers will have a wider choice of payment services, and the competition will increase. But what about the future of payments? PSD-2 could help solve these issues and create a competitive marketplace. Its provisions also encourage innovation.

PSD2 is the second version of the Payment Services Directive, which has several implications for online merchants. In addition to strengthening customer authentication and making the payment process more convenient for consumers, it also introduces new payment services, such as Account Information Services and Payment Initiation Services. The new regulations require banks to use strong customer authentication mechanisms. Further, they require payment service providers to adopt common, open communication standards. In addition, they must comply with the PSD2 guidelines.

The PSD2 also clarifies liability issues between banks and payment initiation service providers. If a third-party payment service provider fails to meet its obligations, it must either reimburse the user or compensate them for the loss. PSD2 is a significant development for the payment industry and works well with other security measures or authentications like FIDO Webauthn.

If you want to learn more about how delegated authentication and payment authentication work with PSD2, you can read this infographic fromLoginID.

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