PSD2, new fraud-prevention processes

February 2, 2018

Currently, consumers are eager for better, more personalised service. The perception of better customer service is often associated with companies’ use of digital tools, designed to save time, makes tasks easier, etc. This is why FinTech companies (most of which are start-ups) have found a market that is quite receptive to what they have to offer. And the traditional banking sector, which is normally reticent to change, has come around, in some cases even enthusiastically, to using apps and other digital options.

However, no one (companies or consumers) wants to improve at the expense of security. It is clear (companies in markets like Europe, Africa and the Middle East saw fraud-related losses increase 39% in 2016) that the digital world requires extra effort to protect data and economies, especially in a sensitive sector like finance.

At the same time, fraud detection  has been hindered: going after a “real” identity thief isn’t the same as a “virtual” one. It is much easier for the latter to hide out online.

Fighting fraud with prevention thanks to PSD2

The word fraud sounds terrible, but it’s even scarier if we look at the figures: illicit activities are estimated to cost a company between 0.3% and 3% of its yearly revenue… The best path for companies to attack fraud is by taking advantage of client data. This includes, for example, identifying the client (who is interacting with our e-commerce site or product, for example); getting more information on them (before giving them a line of credit, for example); looking for common patterns among fraud detected (knowing how cyber-delinquents act to be on the lookout for new attempts); using fraud-prevention tools, etc.

For all of this, companies can take advantage of the technological advances of fraud-prevention tools. Unnax is a BaaS platform based on proven and scalable technology. It uses an API for creating applications that manage the handling and control of bank accounts, bank transfers and online services for clients.

What could Unnax do for your business?

Unnax improves interconnectivity for all these financial processes. This helps companies concentrate on their core business, enhance efficiency and offer new products based on leading technology. PSD2, the revised Service Payment Directive, which has entered into application on January 13th, 2018, will facilitate competetion, efficiency and allow consumers to benefit from safer and more innovative electronic payments.

These learn to get out ahead of cyber-criminals who are also becoming more and more advanced, and use more sophisticated techniques. It’s an ongoing battle but if we know the weapons available to us and use them properly, we can minimise or do away with fraud completely. Plus, we have the advantage that those who develop these tools are also working to make sure they don’t negatively affect user experience.

PSD2 emphasises security

Every businessperson and professional should take stock and see if they are prepared for the new digital era (in terms of business model as well as protection). In any case, there are new regulations that strive for transparency and put the rules of the game on the table, also in terms of security and fraud prevention. We’re talking about the new EU Directive on payments (PSD2), which went into effect in January 2018.

As we’ve mentioned in previous posts, the PSD2 aims to promote an ecosystem based on everyone having the opportunity to safely make real time payments, while also opening up the financial market to new players (which is known as open banking).

What fraud-prevention improvements does the new directive include?

PSD2 tightens the requirements for security and authentication (Strong Customer Authentication). As such, users will have to provide three forms of identification to access financial services: something they know (for example, a password or PIN), something that belongs to them (such as a card or mobile phone) and something that is part of them (which could be a fingerprint or another biometric identifier).

This way, companies can securely identify their clients by using APIs (in compliance with the new directive). At the same time, financial APIs also give businesspeople valuable information that can benefit their business. Are we talking about the future? No way: the RTS (Regulatory Technical Standards for application of PSD2) go into effect next September, fostering the use of open APIs. This will also be when the payment directive is fully implemented. Can we help you along the way?

 

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