using biometric authentication for online transactions. So while you’re thinking of a plan to meet SCA requirements, here are some things to keep in mind: Ideally, your subscription management solution should have done all the groundwork for you to be PSD2 compliant. The lower the acquirerâs overall fraud rate, the higher the limit of low-risk transactions that can be claimed as exempt, as shown here: In some cases, corporate payments rely on other security methods that would then exempt the transactions from SCA. For a subscription being resumed or reactivated after December 31st, 2020, customers can be asked to complete 3DS for their subscriptions to be activated. Account servicing payment service providers (ASPSPs) are required to have a PSD2-compliant way to provide TPPs with access to account data and payment functionality by 14 September 2019. Each issuer will have different risk-analysis models that inform their decision, and some may not even have the infrastructure in place to support certain types of exemptions -- especially in the short-term. If your checkout is not capable of handling the SCA flow, then the payment will fail. 3D Secure 2.0 brings in a new way to authenticate transactions that are compliant with SCA. Subscription businesses will have to bring in changes at various touch points (refer impact areas section) so that they don’t lose out on their revenue or customers. Your checkout needs to be able to handle all the SCA flows so that 3DS 1 and 3DS2 can be applied for transactions that require it. Which brings us to the second piece that you will need to care about. Last updated on 4 May 2020. Most of the banks in the EU will have this feature ready by the end of this year. Merchants offering a recurring or metered billing model (e.g: a subscription service or utility bill) will only need to apply SCA to the first transaction (or verification while vaulting a card in the Braintree Vault). Subsequent transactions (when the customer is not in session) will then be considered merchant-initiated and out-of-scope for SCA. An even better option — use Chargebee js. But here is something - you needn’t have the entire world of PSD2 at your fingertips. This might be an added friction. In the case of subscription renewals, the payments take place without the customers being online. The intent of the PSD2 SCA regulation is to secure ALL electronic transactions, in ALL channels, with SCA. Braintree will continue to stay close to developments related to this exemption to ensure that merchants and cardholders alike can take advantage of this exemption when technical solutions become available. Exemptions have the potential to reduce checkout friction and customer drop-off by decreasing the number of times a customer needs to be authenticated. Some gateways are rolling out changes for SCA in batches, whereas some aren’t too clear about how and when they’ll be PSD2 compliant. If you decide to change payment gateways because your payment gateway decides it won’t support 3DS, then you’ll have to restart the entire process of integrating APIs and updating them constantly. When you integrate with a subscription billing solution like Chargebee on top of your payment gateway, your PSD2 compliance part will be taken care of, so you don’t have to lose out on your time and developer resources for this. Since the information needed to validate these criteria is only available to the issuing bank, merchants will still need to confirm if SCA is required on all transactions that might fall into this exemption category and not any of the others described below. The Revised Payment Services Directive (PSD2) is a regulation that requires strong customer authentication (SCA) to make online payments in the European Economic Area (EEA) more secure. Under the regulatory guidelines, exemptions to SCA requirements will be allowed for certain types of transactions. There’s still a possibility of a small percentage of international transactions that take place in the EU, to require SCA. Initially, customers used a time-bound one-time password to verify a transaction via 3D Secure (3DS). This solution provides a simple way to authenticate transactions with a no- to low-friction checkout experience for cardholders, and allows merchants to shift liability to the issuers on authenticated transactions to help reduce costs associated with chargebacks categorized as fraud. The banking industry is currently working on how to standardise the way data is accessed through ‘Open Banking’ standards. Itâs also important to remember that the decision to accept the exemption will ultimately fall to the issuer. An even safer bet, use a recurring billing system which is better prepared to maneuver through these changes, than you having to constantly create new patchworks of code that get messier over time. The problem with 3DS1 was that customers were redirected to another window for verification, which created friction in the checkout process and in turn, led to an increase in drop-offs at the checkout page.
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