PSD2 and the unknown challenges: a tale of a modern revolution

With January fast approaching, it is time to ask: what do we really know so far about the revised Payment Services Directive (PSD2)? And how much is still unknown?

Banks in Europe are facing a “monumental shakeup,” in the words of a Roland Berger publication, which states that billions of Euros in bank revenue are at stake, now that PSD2 will open the market to new forms of competition, and might even create emerging banks.

PSD2 advocates open banking, creating an opportunity for third party providers (TPP) to access customers’ accounts. Because PSD2 makes it mandatory for TPP to authenticate their payers, there are important requirements for strong customer authentication and also transaction risk analysis.

What is not so well known at this stage is how the new banking landscape is going to evolve in terms of payments flows. There is also uncertainty about what kinds of relationships will be created among these new stakeholders.

Feedzai CEO Nuno Sebastião shared some thoughts with Paypers regarding this question, stating that different types of fraud will naturally evolve with the new payments scenarios. But along with these growing risks, PSD2 represents an opportunity, as banks seek innovations that will help them capitalize on the changes of the payments landscape.

Stakes are high for banks, and they have limited time to design a strategy that will help them prosper with PSD2. Now is the right moment to pursue a solution, and in a space with several options, Feedzai stands out. Its complete offering uses the greatest tool available today to help banks face the challenges of PSD2: artificial intelligence.

Feedzai’s risk engine is the right solution to comply with PSD2 requirements. It provides banks with advanced fraud detection that ensures the highest level of security and a frictionless user experience.

At the end of the day, PSD2 will be about the customer. The banks who thrive in a post-PSD2 world will be the banks that find ways to comply with PSD2 in a way that offers improved security and enhanced customer experience without introducing friction.

In the payments industry it’s not always possible to predict what will happen despite all the regulations and frameworks in place. Banks and other payment service providers need to be prepared and flexible. Feedzai has a future-proof solution that offers that flexibility to adapt to all requirements in the long run.

With PSD2 on the horizon, artificial intelligence and machine learning are peerless technologies in their ability to match high volumes of data and make sense of it. Feedzai’s solution ensures account validation and login authentication, critical flows in an environment requiring strong customer authentication. And with coverage for new data types, and faster time to iterate on models and deploy them in production, Feedzai adapts to unknown behavioral patterns based on previously invisible activity. And with transaction monitoring, Feedzai detects unauthorized or fraudulent payment transactions, even when their underlying patterns are new and unknown.

Although the directive comes into force in the beginning of next year, there will be extended work until 2019, mainly regarding regulatory technical standards for strong customer authentication and security of communications. Brace yourselves for next year, because there are still more chapters to come in this modern tale of PSD2!