#RetailEXPO19: Expert panel declares industry and country unprepared for PSD2

At RetailEXPO in Olympia, London, on May 1 2019, a panel of experts discussed the latest edition of the Payment Services Directive (PSD2) due to become law in September 2019 and unanimously agreed that both the industry and the country are not ready for PSD2.

Daniel Lee, group product owner of payments at Kingfisher, spoke of the benefits of the new directive, listing “transparency with pricing” and “moving towards open and increased choice and the opportunity to innovate” as reasons both retailers and consumers should feel positive about the latest directive.

David Song, principal, EU Personal Finance Policy at UK Finance, added that PSD2 will give customers alternative choices, which consequently should attract new customers.

British Retail Consortium’s policy advisor, Andrew Cregan, added that the most significant win is “driving down costs of payments by circumventing card schemes. I’d like to see merchants driving solutions in the open banking space,” he said.

One of the hopes for PSD2 is the improvement on sale convergent rates, explained Lee. The first version of the 3D Secure Standard (3DS1) was proven to reduce sale convergence rates. “PDS2 should help,” said Lee, “because the whole purpose is to make things frictionless and approve the transaction based on the data. We want to reduce the requirement for step-ups [an additional security step], as we know that reduces convergence rates.”

A race against the clock

The deadline for PSD2 is September 14 2019, a date which Cregan is certain the industry is not ready for. Further, he added, “the country is not ready.” He described a bottleneck in strong customer authentication. “Will any single service provider act in the same way?” he asked. “There is no clear protocol. The larger the merchant, the more complicated the changes. The smaller merchants have concerns and issues around awareness.”

All three panellists urged the retail industry to prepare for PSD2 with great urgency. “It’s imperative to work with acquirers ahead of the September deadline,” advised Song. “This is being implemented to drive down fraud, which is a goal of both financial services and retailers. PSD2 is a result of needing to do better to decrease fraud.”

Cregan warned that “awareness” around PSD2 is “not the same as readiness.” He argues that there isn’t an adequate timeline for card issuers to re-issue cards by September for face-to-face readiness. “It’s already too late to replace PIN entry devices and it wouldn’t deliver benefits to retailers and customers anyway. It’s a waste of money to comply for the sake of box-ticking.”

Cregan called for a decision to be made at the legislation level to make a call on whether the September 14 deadline is realistic. “The deadline is written into UK and European law,” he added, “but for merchants, this is not enough time to prepare. They need more breathing space for both awareness and readiness.” Acquirers, he explained, aren’t ready. “Industry isn’t ready because acquirers aren’t ready and acquirers aren’t ready because they haven’t had the information they need from further up the chain.”

Advice for retailers ahead of PSD2

The panellists shared their advice on how retailers should be getting to grips with the new European payment regulations. “Firstly,” said Lee, “don’t be scared. Only good things are going to come out of this. It’s a way to increase conversion and improve security.” The purpose of PSD2 he reminded the audience, is to enable “frictionless and secure transactions” which will be good for both convergence and sales. “The customer experience will be better so retailers should switch as soon as possible.”

Song advised a move to “BSD2.2 as soon as you can. Don’t take the potential grace period as a given,” he said, referring to the September 14 deadline, “and get liability insurance.”

Further advice was given:

  • Evaluate the wider benefits of PDS2
  • Raise awareness for SCA internally and make it a business priority
  • Take action now because time is running out
  • The mid-term benefits outweigh the short-term pain
  • Prepare a phased 3DS implementation plan
  • Maximise the use of SCA exemptions