If you’re an ecommerce retailer, new EU rules regarding online payments which could affect your ability to process online orders after 14 September. Known as the Payments Service Directive (PSD 2), was adopted in 2015. It will come into force next year but, all European businesses must be compliant with the necessary changes implemented by mid-September.

What is PSD 2?

The PSD 2 directive is intended as an anti-fraud measure. The new rules mean that you’ll need to send shoppers ordering through your site a verification code before they can complete the purchase. The code can be sent to the consumer via SMS text message, email, banking app or card reader. The shopper must then enter the code provided to verify their identity.

According to the European Commission, the new rules will:

  • Make it easier and safer to use internet payment services
  • Better protect consumers against fraud, abuse, and payment problems
  • Promote innovative mobile and internet payment services
  • Strengthen consumer rights
  • Strengthen the role of the European Banking Authority (EBA) to coordinate supervisory authorities and draft technical standards

PSD 2 is the second iteration of European-wide payment rules with PSD 1 first enacted in 2007.


The way the code is sent to the shopper will depend on their bank. HSBC for example will email or text the verification code to its account holders, Barclays customers can opt to get the code to an app, via text or card reader while the online bank Starling will issue its customers a security code via the bank’s app.

What issues surround the 14 September deadline?

There has been some opposition to the PSD 2, with some experts suggesting that the anti-fraud measures could actually prevent around a third of transactions being processed.

The British Retail Consortium estimates anything from 25-30% of all payments transacted online will fail due to flaws with the system. It has stated that in the worst case scenario, some shoppers may not be able to buy online at all. The Consortium’s policy advisor, Andrew Cregan says that there are long term benefits to PSD2 and recognises that it could drive down the cost of payments by encouraging merchants to drive solutions. However, back in May he warned that merchants face a race against time to prepare for the 14 September deadline. Speaking at the 2019 Retaail Expo, he insisted the country “wasn’t ready” with card issues left on the back foot without a sufficient window to re-issue cards in the face of the timeline imposed by the EU. He said, “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.”

So, what should you do next as an ecommerce business owner?

If you currently charge your customers an additional fee for paying by credit card, you’ll need to stop doing so from 14 September. This could mean that you need to consider increasing prices across your store to compensate for the additional cost you’ll now absorb.

You’ll also need to implement a two-factor authentication process for online sales over the value of £30. Your payment service provider should have been in touch already with details of how they plan to account for PSD 2, such as with new security technology.

Depending on your existing service provider, you may also want to research other solutions as it could be that there are better options for you as banks and financial service providers innovate to capitalise on the opportunities that PSD 2 provides.