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Written by Mike Wakeling Head of Product
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17 Dec 2020  |  Compliance

PSD2 comes into full force Jan 1st – here's how Paddle keeps our sellers compliant ✅

2 minute read

Strong Customer Authentication (SCA) - a major development of PSD2 - is coming into full force at the end of the year. Here’s a reminder of how Paddle keeps our sellers PSD2 compliant.

The end of the Second Payment Services Directive (PSD2) transition period is upon us, with the directive coming into full force on January 1st 2021.

The directive is designed to make increased security around card payments online mandatory for many online payments. It was originally set to be enforced from September 14th, 2019, but the transition period was introduced to mitigate the possible negative impact on ecommerce.

Unlike other billing providers, which will expect you to perform all the work to be compliant, Paddle is uniquely positioned, as a Revenue Delivery Platform, to relieve the burden of work for our sellers ahead of PSD2. Here's a reminder of the steps Paddle took ahead of the original deadline in 2019 to ensure we - and therefore all of our sellers - are and continue to be PSD2 compliant:

1. We integrated 3D Secure 2.0 (3DS2) to the Paddle checkout - making our best ever website payment experience PSD2 compliant

The Paddle checkout includes 3D Secure 2.0 as standard - a best practice way to collect Strong Customer Authentication (SCA). Combined with the wide range of other enhancements and improvements that the new checkout offers, buyers enjoy a consistent experience that also meets PSD2 requirements for European transactions. We upgraded our platform infrastructure to allow us to manage 3DS2 all in one place, meaning we can quickly integrate 3DS2 while making it easier to iterate upon and improve in the future.

2. We implemented authentication dunning 

In the event that a payment does need authentication on renewal, Paddle ensures this experience is as smooth and effortless as possible for your customers. Ahead of the original PSD2 deadline, we added a new email to our existing set of dunning emails. This new email alerted the customer and encouraged them to provide authorization for their subscription, allowing the payment to go through smoothly.

4. Managing exemptions

Although PSD2 includes a ‘recurring payments exemption’, there are still a number of variables that may mean a subscription plan isn’t covered and SCA will be required (learn more about exemptions here). We updated our logic around exemptions to maximize payment acceptance. Having logic in place that automatically selects the right exemption based on the circumstances means more card payments are successful, in turn improving conversions.

5. Proactively responding to what banks do next

Over this transition period we've been working with banks and continuously monitoring SCA requests to understand the effect on conversions. Above all, we have been and remain focused on doing whatever is necessary to put our sellers’ interests first and provide their customers with a seamless and compliant experience.

Are you having doubts about whether your billing set up is prepared ahead of the full enforcement of PSD2? There’s still time to switch to Paddle!

To find out more about how we can help you be compliant - and unlock your SaaS business’ growth potential - book a demo.

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