PSD2 – what you need to know

PSD2 – what you need to know

Reading Time: 2 minutes

Due to the accelerated growth of electronic payments and the increase of online card fraud, the European Commission released the Payment Services Directive 2 (or PSD2) in early 2018. 

PSD2 aims to better protect consumers when they pay online and an important factor is the requirement for Strong Customer Authentication (SCA) on the majority of electronic payments. 

This will, of course, have operational implications for hotels. But to what extent? 
For now, it mainly means a new online payment experience that must support SCA, namely 3D secure. 

SCA applies in cases that both the customer’s bank and the bank that the consumer’s funds are transferred to (in this case, your hotel’s) are located in the European Economic Area (EEA). 

Due to high drop-out rates through the payment process, hotels haven’t activated 3DS v1. Even if it means a higher risk of fraudulent transactions!
3DS v2 came to address this issue by simplifying the authentication portion of the booking experience. 

Usually, 3D v2 results in a text message to the cardholder’s phone. This makes for a faster journey for the customer through the payment process and resulting in a decline of the drop-off rate.

What you need to know:

• The standard transactions on GuestCentric’s booking engine are Mail Order/Telephone Order (MOTO) thus outside of the scope of PSD2. They fall into this category since the guest is not charged at the moment of the online booking. This means no modifications are necessary for the booking engine! 
• However, if you have a GuestCentric booking engine with a payment gateway, please make sure that your payment gateway can authenticate your guests’ credit cards in a secure way;
• If you have doubts on how to charge specific reservations, namely refundable, we advise you to contact your banking/point of sale (POS) system. This way you can get clarification the available options to process these types of payments; 
• Please review your current payment workflows and be aware of those that may be impacted by SCA;
• Virtual Credit Cards transactions (like Booking.com) are not affected by this directive because they outside of SCA scope;
• Check with your technology partners how they are preparing for this directive, including OTAs – pay special attention to non-refundable rates;
• Update your terms and conditions to make clear how much is authenticated. You also need to make sure that the guest agrees to the hotel initiated transactions for “no show” and “post departure” charges.

Make sure your hotel is ready by September 14th, 2019!