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How has the poor implementation of PSD2 affected conversion rates for e-commerce merchants?

by TechBriefly Newsroom
8 July 2021
in Articles
Reading Time: 2 mins read
How has the poor implementation of PSD2 affected conversion rates for e-commerce merchants?
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The end of 2020 brought with it a change in the directive that helped fight fraud, the 2005 PSD (Payment Services Directive). The newly unveiled PSD2 launched in 2016 but only came into effect last year. Businesses should have prepared how to handle the changes. Still, many have already experienced a drop in conversion rates. This is a result of the tightening of regulations for electronic payments. But how does the poor implementation of PSD2 result in a negative impact on conversion rates of Europe’s major eCommerce marketplaces?

Where the PSD2 has already been rolled out across Europe, how it has affected conversion rates has already been negative. eCommerce merchants across Spain and France have found a 25% drop in conversion rates. This figure climbs to 30% for Germany and 40% for Italy. These figures are detrimental to any size of business. Some are losing upwards of a million euros every month. While the focus has been on merchants and their loss of money, the authentication factors necessary could put off consumers. They may be perturbed by the time-consuming aspects of the regulation.

As such, the UK’s FCA (Financial Conduct Authority) has pushed back the launch of the regulation to March 14, 2022. The previous deadline of September 2021 would have caused disruption for merchants. They are busy dealing with other issues that are currently impacting business across the UK. More time to get to grips and implement these policies would help. But there is also an element of wanting to prevent the negative conversion rates that have been seen on the continent. UK business has taken a hit. Potentially losing out could result in some businesses folding.

How has the poor implementation of PSD2 affected conversion rates for e-commerce merchants?

All is not lost for businesses. The impact of PSD2 and the SCA (Strong Customer Authentication) requirement of the PSD2 can be lessened. Businesses must provide at least two authentication documents for electronic payment verification. However, with the right authentication software, and having the relationship between conversion rates and PSD2 and SCA explained, businesses can prevent these conversion rates from dropping. Many businesses have implemented methods of restoring their conversion rates to similar levels to before the regulation. All it takes is the technical know-how to do so and the time and diligence to understand the practical components of the PSD2. Indeed, conversation rates can increase with the right software.

As with any regulation that affects best practices in a business, changes are likely to result in a loss of earnings. But this doesn’t have to be the case. There is a wealth of information available that will help businesses get to grips with the PSD2 and the SCA components of the legislation. Businesses could take the overhaul as a chance to change their methods of working. This could help foster improved conversion rates going forwards. The benefit of sweeping changes such as this means that all merchants are forced to change together. The UK’s extra six months should position businesses as ready to mitigate any negative implications.

Tags: e-commerce

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