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7th June 2019

Regtech will play a more important role in PSD2, says Mitek
Opinion

E-commerce giants have warned that online purchases could be at risk thanks to new PSD2 rules set to come into force in September. In response, Mitek’s EMEA MD Rene Hendrikse comments on the urgent need to consider anti-fraud technologies to combat this issue and be compliant – sooner rather than later.

Mr Hendrikse, said: “Despite better deals, access to new products and services, and better control over their money, there is a dark side to open banking – the potential for fraud will grow exponentially. To tackle this, the regulator has introduced ramped up identity checks, with the addition of rules around ‘strong customer authentication’ (SCA) coming into force in September. But recent warnings from e-commerce groups suggest online retailers may not be able to process online transactions – and could miss out on billions in sales as a result.

“Sooner rather than later, retailers must recognise the need to invest in anti-fraud technologies. With the new anti-fraud rules, every customer will have to be authenticated by at least two of the following criteria: something they have, something they are, and something only they know. Come September, this will be necessary for every online transaction.

"This could include an ID document, a biometric identifier, and a security question, going beyond simply your card details as is the current standard. This introduces an additional layer of security to defend against the threat of fraud from online transactions – but it also presents a challenge for organisations to implement with only months to go.

“Online retailers must focus on putting the technology in place to be able to verify customer identities in line with PSD2. Regtech, technology that helps achieve regulatory compliance, will play a more important role than ever before. For example, identity verification technology handles the ‘are’ and ‘have’ of SCA, by verifying an ID document against a selfie. AI-driven anti-fraud technologies will be crucial to monitoring for and stopping fraud when it occurs.

“Within the next few months, investing in the right technologies and implementing them quickly and efficiently should be top of the agenda for retailers and e-commerce groups. If not, they will find themselves in serious trouble.”