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Shopping online is easy and convenient. And it has become common practice for many Europeans. However, consumers have to be able to validate and pay for these online transactions simply and securely.

To this end, the second European Payment Services Directive (PSD 2), which came into force in 2019, created a legal framework to make payment transactions more secure for both consumers and retailers. New rules have been drawn up, designed to provide additional protection for customers paying by card for online purchases. Consequently, as of January 2021, the principle of strong customer authentication (SCA) will apply.

This means that consumers have to provide authentication when buying a product or service online. For example, except for transactions with a low fraud risk, it will no longer be possible to pay for an online purchase simply by giving a bank card number and the card verification code (CVC) on the back of the card.

In fact, strong authentication is already the rule for many daily purchases. When we use our bank card for physical transactions, we have to type in the PIN code to validate the transaction. Contactless payments are the exception here, as they don't require the PIN code to be entered for amounts up to EUR 50 per transaction (and a cumulative total of EUR 100).

What does this mean for retailers?

In order to apply the new rules from 1 January next year, all webshops and online operators, throughout Europe, will have to make sure their systems are compatible.

In agreement with the National Bank of Belgium, the Belgian banks have drawn up a phased schedule to enable a coordinated transition. This provides for the gradual implementation of the new strong authentication rules for online purchases, thereby enabling retailers with online facilities in Belgium to be ready in time:

  • As of 25 August 2020: amounts in excess of EUR 1,500 that do not comply with the new regulations will be refused.
  • 22 September 2020: limit reduced to EUR 250.
  • 19 October 2020: limit reduced to EUR 30.
  • 17 November 2020: limit reduced to EUR 0.

So 25 August 2020 is the first milestone in this phased plan, setting the limit to amounts as of EUR 1,500. Online retailers and webshops, in Belgium and abroad, therefore have to adapt their systems to comply with the European directive. Otherwise they risk the banks refusing payments that do not meet the new security rules.

Retailers are therefore advised to contact their payment system provider to check whether any modifications need to be made to their current payment system. In Belgium, however, strong authentication for online payments is already well established, so many retailers already comply with the obligation. This is less true for foreign online retailers: until now, strong authentication was not familiar to them.

What does this mean for customers?

For customers shopping online, the changes will normally be barely noticeable as we are already very familiar with strong authentication in Belgium. Customers may just be asked for additional validation of the payment, if this secured validation is not already in place. Of course, it is essential that the provider has brought its payment system into line with the new rules.

For more information:

- Application of strong customer authentication for online purchases.

- Belgian migration plan, available on the NBB website

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