In 2021, the e-commerce sector in France recorded a 15.1% increase in turnover1. This strong growth is not without consequences for e-merchants: at the same time, on a global scale, payment fraud has generated more than 6% loss of revenue for 38% of merchants2. This is a real loss of revenue that the PSD2 intends to remedy via strong authentication.
With the growth of online payments comes an increase in fraud. Losses due to online payment fraud could exceed $206 billion between 2021 and 20253. In France, more than half (51%) of merchants have seen an increase in fraud attempts during the pandemic, which could affect their profitability.
It is in this context that the PSD2 reinforces the security of payments thanks to strong authentication which now applies to the majority of transactions. Nevertheless, this procedure can also affect the fluidity of the purchasing process, mainly on mobile phones: although 88% of consumers think that strong authentication makes online transactions more secure, 38% also consider it to be an obstacle4.
Therefore, in order to offer a frictionless payment path, e-merchants have the possibility to bypass this authentication by requesting exemptions, provided they do not exceed a certain fraud rate threshold. Indeed, in the case of low-risk transactions, the TRA (Transaction Risk Analysis) takes into account the amount of the transaction and the merchant's fraud rate. The higher the amount, the lower the average fraud rate should be. And the lower the fraud rate, the more likely the exemption request will be accepted.
So how can better fraud management within the framework of PSD2 enable the merchant to smooth the payment process? One of our experts answers.
On the one hand, PSD2 allows consumers to benefit from new innovative services, notably via open banking. These include: the aggregation of bank accounts within a single application to facilitate the monitoring of their expenses or instant transfers. On the other hand, it strengthens the security of payments through the principle of strong authentication. At the same time, 3D Secure V2 contributes to the improvement of online payment and authentication via the mobile phone (now widely used). For the cardholder, this is a double guarantee of security, as it is never pleasant to be defrauded and to suffer the financial consequences. Not to mention the time lost in obtaining a refund from the bank in the event of fraud.
The strong authentication applied in the framework of PSD2 has created new fraudulent behaviours and generated an increase in fraudulent attempts on alternative payment methods. The main source of fraud is phishing, which leads to the theft of card numbers (78% of fraud), far ahead of lost or stolen cards (18%)5.
This is the whole principle of PSD2: combining fluidity and security thanks to TRA. And this is also the advantage of being accompanied by a PSP such as HiPay, which has a team of dedicated experts and an anti-fraud tool capable, among other things, of analysing transactions and purchasing behaviour. For the e-merchant, it is the assurance of being able to secure transactions deemed to be at risk via strong authentication and to request frictionless on transactions analysed as low risk to increase its acceptance rate. Thanks to an accurate analysis of transactions, issuers will be able to perceive merchants as genuine trustworthy players and, consequently, will be more inclined to accept exemptions in order to offer smoother purchase paths.
1 According to "Bilan annuel du e-commerce en France en 2021" - Fevad, February 2022
2 According to a study by Fidelity National Information Services, July 2021
3 Online Payment Fraud: Emerging Threats, Segment Analysis & Market Forecasts 2021-2025, Juniper Research, July 2021
4 According to a study by OpinionWay « E-commerce 2022 : évolutions et attentes des Français », 2022
5 Observatoire de la sécurité des moyens de paiement, Banque de France, 2021