PSD2 stands for Payments Services Directive 2, and is a new EU regulation on authenticating online payments. PSD2 goes into effect on September 14, 2019. This affects all European Business Owners who bill Clients based in Europe only through Stripe.
Strong Customer Authentication (SCA) – Payments
A key part of PSD2 requires Strong Customer Authentication (SCA) in order to reduce fraud and make online payments more secure. SCA is applied to transactions where both the business and the cardholder’s banks are located in the European Economic Area (EEA).
The most common way of authenticating an online card payment relies on 3D Secure – a standard used by most European cards. 3D Secure adds an extra step after checkout where your Clients (the cardholder) is prompted by their bank to provide additional information to complete a payment (e.g., a one-time code sent to their phone, or a fingerprint authentication through their mobile banking app).
Some payments may require SCA, based on the value of the payment and the bank’s overall fraud rates.
SCA will not be applied to transactions where:
- The Business Owner or the Client does not reside in the EU
- The Business Owner enters credit card information on an Invoice or Recurring Template with Virtual Terminal
- The Business Owner is using Braintree for online payment processing
- Low risk transactions (used for transactions with a maximum value of €500)
- Low value transactions (any transaction below €30 will not require SCA). There is a limit of 5 consecutive transactions, or a cumulative limit of €100 – once reached, SCA is required again
- Whitelisting – after the first SCA verified purchase, the Client can whitelist the Business Owner so that subsequent purchases do not require SCA
- Corporate payments – Corporate cards that are not in the cardholder’s name and virtual credit cards are exempt from SCA
As an EU-based Business Owner, no further action is required. Your Clients located in the EU may have to complete SCA before their payment is successful. As a Client, the steps to pay an Invoice can be found here.