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In October, the European Banking Authority (EBA) finally revealed the extended deadline for the migration to stronger customer authentication (SCA) under the revised Payment Services Directive 2 (PSD2) – now set for 31 December 2020.

This new deadline has been pushed back by 15 months, from 14 September 2019, and the original deadline came and went before the extension was issued. However, the EBA acknowledged back in June that it would have to provide an extension due to the challenges which have arisen from a complex payments market.

In the opinion, which was published on 16 October, EBA stated that it now expects the 2020 migration deadline to provide enough time for national competent authorities (NCAs) to make the expected arrangements. It also recommends that they take a “consistent approach” toward the SCA migration period across the EU and ensure that payment service providers (PSPs) carry out the necessary actions.

Paul Thomalla, global head of payments at Finastra, says: “Initial guidelines set out by EBA for SCA outlined the ‘why’ and the ‘what’ of the regulation, which left industry players to interpret ‘how’ these changes were meant to be implemented. Initially, this led to fragmentation and non-compliance for many due to a lack of a common defined standard to work towards. With the deadline now being pushed back to December 2020, it is the perfect opportunity for the industry to come together as a community to define secure and accurate standards to meet the EBA’s requirements for SCA.”

Thomalla notes that for those involved in the industry, the news did not come as a surprise but for many, it did come as a relief. While these changes will be beneficial for the end-customer, the sheer amount of work required with retailers and merchant acquirers to implement them meant the September deadline was always going to be up for reconsideration.

Furthermore, the EBA recommended that, where required, NCAs must inform PSPs in their jurisdiction that the supervisory flexibility does not represent a delay in the application date of the SCA requirements in PSD2 and the EBA’s Technical Standards. Rather, it means that NCAs increase the focus on monitoring migration plans instead of pursuing immediate enforcement actions when they see PSPs that are not compliant with the SCA requirements, the EBA opinion stated.

Consumers will also be protected against fraud as required by the law, This means that NCAs, according to EBA, need to inform PSPs about the liability regime under PSD2 – PSPs are still liable for unauthorised payment transactions.

Duncan Barrigan, chief product officer at GoCardless says that this also reapplies pressure for a rapid migration: “The industry was granted a much-needed extension, but the last few weeks were never a time to sit back and relax. Merchants, PSPs and all players in the payments ecosystem will now have to continue working and show demonstrable evidence of their migration plans to meet the deadline.” He continues that this is, in fact, a golden opportunity for businesses to review payment strategies more holistically.

“Most importantly, it’s a chance to review the entire shopping and payments experience in the eyes of the customer. Design a payments solution that offers a great customer experience; with convenience, choice and security for all. The clock is still ticking and, to stay out of the EBA’s firing line, businesses need to shape up for SCA,” Barrigan says.

According to Jude Bly, vice president financial services, payments practice lead at Publicis Sapient, the extension is important due to its impact across payments ecosystems, not only in the IT systems arena but across the operating model, people and processes.

“The recently confirmed extension from the EBA intended from the original timelines will allow a ‘consistent and harmonised’ implementation of SCA across the industry. It will allow all parties to be ready and be more consistent in their implementation, thus reducing the risk of disruption and making the transition easier for the consumers,” Bly says. “Although the extension of implementation timelines will provide more time for PSPs, some may have already committed to a tactical compliance route to hit the original timelines. This may mean PSPs are at a decision point on whether to revisit their original approach.”


Article by-

Sunniva Kolostyak


by IBS Intelligence