# PSD2 and Personalising Customer Experience
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-02-08
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: How PSD2 Impacts Checkout Process: SCA and 3DS Explained
Meta Description: Learn how PSD2 and Strong Customer Authentication (SCA) are changing the checkout process and impacting customer experience, revenue generation, and cart
URL: https://financedigest.com/psd2-and-personalising-customer-experiencehtml

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_By **Galit Michel,** VP of Payments,_ [_Forter_](https://www.forter.com/)

The eCommerce world is increasingly competitive, especially as more and more consumers turn to online shopping due to COVID-19 and the need to socially distance.

Businesses that want to maintain a competitive advantage during this time are investing heavily to understand their customers’ shopping habits, online behaviour, and preferences. Doing so enables customisation and personalisation of the shopping experience, thereby increasing conversion and revenue generation.

Today, [merchants care about how a consumer](https://www.financedigest.com/epi-how-to-build-trust-and-adoption-among-consumers-and-merchants.html "EPI: How to build trust and adoption among consumers and merchants") arrived at a website, their previous purchases, what items they clicked on, how much time they spent on the website, and more, yet they often forget about their customers’ checkout preferences and what verification method will cause the least friction for them.

This is because the payment flow is seen as a necessity rather than part of the shopping experience, and is not seen as something that can be personalised.

The EU’s Revised Payment Service Directive (PSD2) changes that.

**How PSD2 Changes Checkout**

PSD2 was designed to [protect businesses](https://www.financedigest.com/the-best-ways-to-protect-your-business-from-cyber-threats-in-2021.html "The best ways to protect your business from cyber threats in 2021") and consumers by adding Strong Customer Authentication (SCA) to the checkout process. This is most often done through the incorporation of 3D-Secure (3DS).

However, when 3DS is added to the checkout process, the payment flow changes to include additional layers of friction that did not exist before, [changing the checkout process customers](https://www.financedigest.com/how-brands-can-adapt-marketing-tactics-to-better-suit-customers-changing-shopping-habits.html "How brands can adapt marketing tactics to better suit customers’ changing shopping habits") are familiar with to something more complex and time-consuming.

The new layer of friction that 3DS adds increases cart abandonment rates, harms [customer experience](https://www.financedigest.com/insurers-ready-to-fight-back-against-poor-customer-experience.html "Insurers ready to fight back against poor customer experience"), and leads to a decline in revenue generation.

The additional 3DS verification that customers will need to input changes the entire [customer experience](https://www.financedigest.com/is-your-customer-experience-exceptional.html "IS YOUR CUSTOMER EXPERIENCE EXCEPTIONAL?") and makes way for further problems; When customers have to input additional information, this increases the chance of human error, and legitimate customers may find their transactions declined. The additional layer of verification may also [provide customers more time](https://www.financedigest.com/finger-pointing-helps-no-one-it-is-time-for-retailers-energy-providers-and-government-to-band-together.html "Finger-pointing helps no one: it is time for retailers, energy providers and government to band together") to think about their purchase, allowing them to get buyer’s remorse and abandon the purchase before completion.

If merchants want to [reduce the impact PSD2 and 3DS have on their business](https://www.financedigest.com/simple-ways-to-reduce-business-costs.html "Simple Ways to Reduce Business Costs"), they need to shift their mindset and view the payment flow as an integral part of the consumers’ shopping experience and a crucial element of their entire operation.

**The Need to** [Meet Customer Expectations](https://www.financedigest.com/theres-a-fine-line-between-relinquishing-control-and-accountability-financial-institutions-must-balance-both-to-successfully-cloudify-operations-and-meet-customer-expectations.html "There’s a fine line between relinquishing control and accountability. Financial institutions must balance both to successfully cloudify operations and meet customer expectations")

The fact that PSD2 adds a layer of friction to the checkout process is in stark difference to [consumers’ evolving payment habits and expectations](https://www.financedigest.com/u-s-consumers-inflation-expectations-highest-in-8-years-ny-fed-says.html "U.S. consumers’ inflation expectations highest in 8 years, NY Fed says").

Today, online shoppers [expect a customised shopping experience](https://www.financedigest.com/cherry-picker-crane-market-is-expected-to-experience-substantial-gains-with-projections-around-6-to-8-cagr-from-2021-to-2031.html "Cherry Picker Crane Market is expected to experience substantial gains, with projections around 6% to 8% CAGR from 2021 to 2031"), and personalisation is a crucial part of that. Businesses that want to continue to grow must recognise this and meet their [customer expectations](https://www.financedigest.com/banking-from-anywhere-embracing-technology-to-exceed-customer-expectations.html "Banking from anywhere: embracing technology to exceed customer expectations") everywhere – including the payment process.

By knowing what customers expect of the checkout process, merchants will be able to [adapt their payment](https://www.financedigest.com/adapting-payments-to-reassure-consumers-and-safeguard-profitability-during-times-of-uncertainty.html "Adapting payments to reassure consumers and safeguard profitability during times of uncertainty") flow accordingly, providing customers the best possible flow that will enhance their shopping experience and facilitate the checkout. In doing so, merchants will create an ecosystem of trust, increasing customer [loyalty](https://www.financedigest.com/the-problem-with-measuring-customer-loyalty-and-how-to-overcome-it.html "The problem with measuring customer loyalty; and how to overcome it") and lifetime customer value.

For example, if a consumer is completing a checkout [process on their mobile device](https://www.financedigest.com/disruptive-thought-process-to-keep-the-cash-registers-ringing-for-neurostimulation-devices-market.html "Disruptive Thought-Process To Keep The Cash Registers Ringing For Neurostimulation Devices Market"), providing them with an SMS code as an SCA verification method can make the checkout process smooth; however, if another type of verification is sent, this may deviate from their expectation and harm their experience.

In contrast, a desktop shopper may not be near their device, and as a result, may abandon the cart if they have to get up to find their mobile device. Some shoppers may prefer guest checkout, especially for their first transaction on the site, however if a [merchant does not offer it because of fear of fraud](https://www.financedigest.com/merchants-are-the-first-line-of-defence-against-fraud-heres-how-we-can-help-them.html "Merchants are the first line of defence against fraud: here’s how we can help them"), they will lose out on the transaction and cause the customer to be frustrated.

Merchants need to recognise that instead of expecting consumers to adapt, their role is to optimise their eCommerce [businesses’ payment flow to meet evolving customers’](https://www.financedigest.com/why-late-payments-are-hurting-your-customer-as-well-as-your-business.html "Why late payments are hurting your customer, as well as your business") expectations. As PSD2 goes into effect, knowing what [customers expect and meeting](https://www.financedigest.com/meeting-customers-where-they-are-through-financial-inclusion-and-hyper-personalization.html "Meeting Customers “Where They Are” Through Financial Inclusion and Hyper-Personalization") those expectations becomes even more critical for businesses.

**Personalised Payment and Verification**

[Knowing customers’ preferred payment](https://www.financedigest.com/does-softpos-signal-the-end-of-payment-hardware-as-we-know-it.html "Does SoftPOS signal the end of payment hardware as we know it?") flow (including preferred payment method and SCA verification method) is the only way for merchants to comply with PSD2, add a layer of SCA, and increase their conversions and revenue generation.By recognising the different payment and verification [needs of customers](https://www.financedigest.com/3-reasons-your-business-needs-customer-reviews.html "3 reasons your business needs customer reviews"), merchants will be able to maximise revenue generation and reduce declines.

For example, some consumers may be more inclined to complete a purchase if they have a split payment method, while others may care more about seamless checkout and may be dissuaded from a purchase if a pop-up window comes up. Knowing this could be the difference between a completed checkout and cart abandonment.

Knowing which payment method to offer and which verification method to apply becomes critical under PSD2, as all merchants will need to perform 3DS on transactions in the [European Union (EU) and European Economic](https://www.financedigest.com/european-bourses-steady-as-focus-remains-on-key-economic-data.html "European bourses steady as focus remains on key economic data") Area (EEA).  The increased use of 3DS will yield a higher decline rate, unless smart routing with dynamic 3DS is incorporated.

Personalising the payment and verification method is possible through smart routing and dynamic 3DS. With smart payment routing, [artificial intelligence](https://www.financedigest.com/artificial-intelligence-ai-to-catalyze-the-continuous-positive-airway-pressure-cpap-devices-market.html "Artificial Intelligence (AI) to catalyze the Continuous Positive Airway Pressure (CPAP) Devices Market") (AI) and behavioural analytics are applied to each transaction, enabling merchants to provide each customer with the checkout process and verification method that they prefer.

By automatically routing each transaction through the most suitable checkout process, merchants can [boost revenue](https://www.financedigest.com/optical-satellite-communication-market-emerging-trends-to-boost-the-global-revenue-growth-discussed-in-a-new-market-research-report-by-tmr.html "Optical Satellite Communication Market – Emerging Trends to Boost the Global Revenue Growth Discussed in a New Market Research Report by TMR") while ensuring their business is safe from fraud and PSD2 compliant.

**The [Payment World](https://www.financedigest.com/unfolding-the-great-payments-disruption-how-consumers-can-navigate-this-new-financial-world-and-how-financial-institutions-can-rise-to-the-challenge.html "Unfolding the Great Payments Disruption – how consumers can navigate this new financial world and how financial institutions can rise to the challenge") is Changing**

Combining a [global pandemic](https://www.financedigest.com/outbreak-of-the-covid-19-pandemic-is-expected-to-severely-affect-the-global-packaging-and-labelling-services-market.html "Outbreak of The COVID-19 Pandemic is Expected To Severely Affect The Global Packaging And Labelling Services Market ") and a large-scale regulation has led to a complete shift in the payment world. Today, [consumers are overcoming their fear and turning](https://www.financedigest.com/the-digital-finance-revolution-empowered-consumers-turn-digital-to-protect-financial-security.html "The digital finance revolution: empowered consumers turn digital to protect financial security") to online shopping, and previous online shoppers are increasing their reliance on digital brands.

This [creates a massive opportunity](https://www.financedigest.com/grain-and-cereal-crop-market-novel-technological-solutions-will-create-lucrative-growth-opportunities.html "Grain And Cereal Crop Market : Novel Technological Solutions Will Create Lucrative Growth Opportunities") for merchants if treated the right way.

Consumers who are not experienced eCommerce shoppers are only now overcoming their hesitation. Creating a friction-full checkout process or unexplained false declines will cause them to abandon their [shopping cart](https://www.financedigest.com/e-commerce-stop-reinventing-the-shopping-cart.html "E-commerce: Stop reinventing the shopping cart") and the merchant.

To meet the needs of existing and new online shoppers, [merchants must treat the checkout](https://www.financedigest.com/psd2-merchants-must-regain-checkout-control-through-delegated-authentication.html "PSD2: Merchants Must Regain Checkout Control Through Delegated Authentication") process as a crucial part of the user experience and invest in knowing their customers preferred payment and verification methods, as well as their online shopping preferences.

By making the checkout process an extension of the personalisation process, merchants will truly know their [customers’ needs](https://www.financedigest.com/you-dont-need-magic-to-anticipate-your-customers-needs-just-the-right-tech.html "You don’t need magic to anticipate your customers’ needs, just the right tech"), behaviour, and expectations, and in meeting their needs, will be able to provide them with a better experience.

In today’s competitive and [digital world](https://www.financedigest.com/six-reasons-why-digital-world-classtm-finance-organizations-outperform-peers.html "Six Reasons Why Digital World ClassTM Finance Organizations Outperform Peers"), rejecting legitimate transactions or scaring customers away is not an option; having a payment optimisation partner, dynamic 3DS, and smart payment routing is the only solution.

For merchants to offer a truly personalised customer [experience and understand their customers’ preferred payment](https://www.financedigest.com/improving-customer-experience-and-profits-with-embedded-payments.html "Improving customer experience and profits with embedded payments") methods, they must ask the following questions:

1. Do you have high cart-abandonment rates?
2. Does your [payment optimisation partner customise payment methods per customer](https://www.financedigest.com/can-banks-acquire-customers-with-biometric-payment-cards.html "Can banks acquire customers with biometric payment cards?")?
3. How does your payment [partner know when to offer](https://www.financedigest.com/passendo-partners-with-leading-media-company-audienzz-to-revolutionise-its-ad-offer-in-a-portfolio-of-over-70-premium-newsletters.html "Passendo partners with leading media company, audienzz, to revolutionise its ad offer in a portfolio of over 70 premium newsletters") different verification methods?
4. What solutions do you have in place to reduce checkout friction?
5. Do you have [insight into the checkout patterns of your customers](https://www.financedigest.com/sports-and-athletic-insole-market-players-eye-custom-and-3-d-printed-products-for-performance-optimization-says-future-market-insights.html "Sports and Athletic Insole Market Players Eye Custom and 3-D Printed Products for Performance Optimization, Says Future Market Insights")?


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