Digital fraud has sharply increased simultaneous with a significant rise in alternative payment methods. In tandem, we have also seen the emergence of new generative AI fraud models. To combat a constantly shifting threat landscape, the European Union (EU) has introduced the Payment Services Directive 3 (PSD3) to bring enhanced security to the payments ecosystem whilst maintaining a seamless customer experience.
PSD3 and Payment Services Regulation (PSR) both offer unified frameworks that streamline the financial landscape for traditional and fintech players, ensuring a collective commitment to consumer safety. However, there are differences between the two. PSD3 is a directive with room for interpretation and is implemented in various ways across EU member states, whilst PSR is a ruling directly applicable to all EU countries.
The inception of Open Banking was a result of the ripple effect of Payment Services Directive 2 (PSD2), fostering endless innovation among fintechs and digital banks. Under PSD3, there is room for even further advancements. This is because Payment Service Providers (PSPs) and Third-Party Providers (TPPs) bear full responsibility for fraud unless they can demonstrate their efforts to prevent it. The path has been paved for pioneering combative solutions.
The key to winning in this ever-evolving payments landscape is to avoid customer friction through the powerful combination of data and technology – both within the customer journey at the front end, as well as in the background.
The constant and unwavering evolution of customer transaction behaviour and demands have heavily influenced PSD3. There is a growing emphasis on instant payments and the expectation that consumers should have a gold-standard experience while also being safeguarded. Mastering the skill of simultaneously balancing these aspects in an ecosystem underpinned by ever-evolving regulation is crucial.
Companies will thrive in this regulatory environment through equilibrium: protecting against fraud without compromising data privacy or ease of payment for consumers. Successfully synchronising the use of technology and data means that players in the payments space can and should strive for a holistic combination of passive and continuous authentication.
LexisNexis® Risk Solutions dedicates considerable resources to supporting clients in protecting customers while providing a great consumer experience. For example, one of our newest solutions enables users to verify personal and business beneficiary bank account names or statuses for up to 58% of the world’s population. By seamlessly and securely confirming that account details are routed to the true intended end recipient for cross-border and domestic payments, customers can combat Authorised Push Payment (APP) fraud and improve customer relationships simultaneously.
Like the shifts witnessed with PSD2, we are guaranteed to see some gripping seismic shifts in the ecosystem. Despite an initial lag, players will soon rise to the challenge and consider broader developments beyond regulation.
The EU will be at the forefront of a more dynamic and user-centric payments network, building on initiatives like PSD2 and Open Banking that prioritise consumer empowerment. Successful global payment schemes, such as PIX (Instant Payment System) in Brazil and UPI (Unified Payments Interface) in India, will serve as inspirations for the EU to foster solutions that benefit customers and support safe instant cross-border payments. Beyond Europe, amidst geopolitical upheavals, society’s growing demand for controlling financial crime and ensuring transparent transactions will persist.
Organisations are all striving for the ultimate north star: consumers enjoying a seamless experience with the added confidence that their information and transactions remain secure. LexisNexis® Risk Solutions leverages fraud intelligence specific to each industry to protect consumers. Our comprehensive anti-fraud and payments efficiency portfolio authenticates digital, physical, and behavioural criteria throughout the entire customer journey, combating identity and transaction risk on a global scale.
Get in touch to find out more about how we strive to supercharge the performance of the whole payments ecosystem through the power of data and technology.
This interview/article was originally published in The Paypers` Global Payments and Fintech Trends Report 2024. The report compiles insights and expertise from leaders representing companies across the financial services spectrum and it delves into the latest innovations and trends in payments and fintech across key markets worldwide.
Edward Metzger is responsible for the commercial strategy and performance of the Payments Efficiency business within LexisNexis® Risk Solutions. Before this role, Edward progressed through a variety of financial services roles over the last twenty years during his time with Banco Santander, Barclays, and Accenture.
Emilio Rocchi is responsible for the responsible for the international payment strategy for the Fraud & Identity business within LexisNexis® Risk Solutions. Before joining LexisNexis® Risk Solutions, he was a Solutions Consultant specialising in ecommerce and cross-border payments in EMEA, Americas, and APAC at Ingenico ePayments for nine years. Before this, he worked at Ipswitch.
LexisNexis® Risk Solutions harnesses the power of data and advanced analytics to provide insights that help businesses and governmental entities reduce risk and improve decisions to benefit people around the globe. We provide data and technology solutions for a wide range of industries including insurance, financial services, healthcare, and government. Headquartered in metro Atlanta, Georgia, we have offices throughout the world and are part of RELX (LSE: REL/NYSE: RELX), a global provider of information-based analytics and decision tools for professional and business customers.
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