PSD2 requires financial institutions to provide an open banking API. This allows third parties such as Amazon to access sensitive financial data and take payments directly from a customer’s bank account, without the need of an intermediary like PayPal or Visa. The security implications of this open API cannot be understated, and many financial institutions are struggling to appropriately provide new levels of security to safeguard these new, open access requirements.
PSD2 also mandates two-factor authentication for transactions, unless a specific set of low-risk criteria is met. However, most users resist the additional authentication steps and will avoid organizations that use it, gravitating instead toward institutions that reduce or eliminate SCA requirements by proving the transactions are low-risk. Unfortunately, meeting PSD2 requirements to prove a transaction is low-risk is difficult. Most financial institutions will have no choice but to force customers and consumers to perform SCA.
PSD2 includes exemptions from requiring SCA. These exemptions dramatically improve the customer experience, but they require providers to monitor and record specific data and risks surrounding each transaction, and to generate reports showing this information. This data is difficult for most providers to obtain.
Simility uses AI and ML (supervised and unsupervised) to identify new fraud threats from potential gaps created by the open API requirements of PSD2
Simility identifies transactions “posing a low level of risk,” addressing all of the Article 18 requirements
Simility provides all of the reporting capabilities required under Article 21 to take advantage of the SCA exception
The European Commission’s Payment Services Directive 2 (PSD2) is helping to facilitate new opportunities and players within the payments market, but it is also creating substantial new obligations around security. Technology solutions such as Simility can address each of these requirements seamlessly, avoiding the SCA requirement, thus reducing fraud and…