How PSD2 and SCA Authentication Will Affect Shoppers and eCommerce Sites?


Since 2018, talk about psd2 sca authentication has been rife. It is the new system to make online transactions safer for both merchants and shoppers in Europe. The implementation of this was set for September 2019 but it has been extended again as a lot has to be done to have it in place.

If you are not familiar with psd2 sca authentication, here is a summary of the important stuff you should know about it and how it will affect online shoppers and merchants.

PSD2 Defined

PSD2 stands for Payment Services Directive 2. This directive demands that banks provide customer financial details to third party payment service providers. This is done with the consent of the customer. The directive also demands Multi-factor authentications to ensure safer online transactions. That is where SCA comes in.


SCA stands for Strong Consumer Authentication. This is how PSD is implemented with the use of 2-factor authentication. The implementation of SCA depends on the use of 3 authentication choices of which 2 have to be used. These are:




Knowledge refers to information the customer has like a secret PIN or password, Inherence is part of the customer like their fingerprint or facial features and Possession is something in the customer’s possession like a token or a Smartphone App.

Implementation of PSD2

To implement this directive, especially for card transactions, a 3-D method has to be used. This is a method that has been in place to ensure transaction security since 2001, but with this new directive some changes had to be made to it, and this introduced 3DS2 which is the improved version of the 3-D method.

3DS2 allows the banks the use of several data points to carry out a risk- analysis of the transaction. However, for transactions of lower risk like 30 Euros and below, there is no need for banks to employ the second authentication request.

Because many people today carry out transactions using mobile phones, 3DS2 has been made mobile friendly and this makes it much easier to carry out transactions withlimited hassles involved.

Impact of PSD2 on Merchants and Shoppers

Most merchants will be wondering how this implementation will affect them and the customers too would want to know how this makes shopping better. There is very good news about this for both and there is also not so favorable news. Let us start with the Good.


Decrease in Fraud

Cases of online fraud are registered in the millions every year. Identity theft is the highest reported case of fraud online. Customers are not the only victims of fraud online, merchants too have to struggle with the vice as well. With the implementation of PSD2, it will become harder for fraudsters to stealpeople’s identities or to defraud e-commerce sites.

This directive is first and foremost intended to improve online security by making it hard for fraudsters to do what they usually do.

Increased Competition

Since more organizations will be able to provide financial transactions instead of the monopoly of the banks, there is going to be more competition which is a good thing for the shoppers. Rates per transaction will reduce as more companies try to attract more customers to use their services.

Competition is also good for the quality of services. Shoppers can benefit from better services and financial organizations will be challenged to do better which is good for them overall.

Better Privacy

Shoppers can relax more because their private information is safely kept and access to it is only through consent. Sometimes it is not just identity theft that bothers customers when they have to provide private information. It is also the invasion of privacy by third parties they do not wish to share such information with. This directive will ensure that private information is only shared with parties that you consent to.

Better Mobile Experience

Because of the use of 3DS2, the mobile experience is enhanced. Shoppers will be able to use their mobile devices to shop with fewer problems. The merchants too will appreciate this because mobile conversions will increase.

Lengthy Checkout

Because of the increased safety provisions, it will take longer to checkout as shoppers are asked to verify different things. Shoppers are likely to get frustrated. The merchants will not like this development since it is likely to reduce the number of conversions. Cart abandonment is a disadvantage merchants will have to deal with.

Fraud Increase Outside Europe

Since it will become harder for fraudsters to practice their crime in Europe, other continents that have not adopted SCA will see an increase in cases of fraud.


Some of the directives are already in place and merchants are seeing some of the effects, but the full implementation has been pushed further so there is time to get ready to work with the new system.