PSD2 in Numbers How PSD2 has impacted Europe's five largest eCommerce markets

PSD2 in Numbers

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For many the way to measure the impact of the EU’s Payment Services Directive 2 has been on whether it has reduced fraud or not. The biggest impact in many respects has been on the whole online payments experience, with some merchants missing out on 8-10% revenue. So what is the current experience for merchants in Europe’s 5 largest ecommerce markets? The charts below track how PSD2 has impacted the UK, Germany, France, Italy and Spain.

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Italy

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The United Kingdom

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Spain

Frictionless 3DS

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The United Kingdom

Italy

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3DS Success Rate on Web vs. Mobile

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3DS Version Usage

3DS Outcomes

3DS Success is when a customer, having added a product to the online shopping cart of an e-commerce site, completes the 3DS challenge and completes their purchase. 3DS Failure is when a customer/cardholder hasn't entered their details correctly, failing the 3DS challenge.

3DS Abandonment is when a customer, having added a product to the online shopping cart of an e-commerce site, doesn't complete the 3DS challenge and doesn’t continue with the purchase. Technical Issues are where there is a technical issue with 3D Secure during the authentication process and the purchase is not completed.

3DSv2 allows merchants to use a frictionless payment flow by sharing extra information about the transaction such as shipping address. Using this information the issuer does a risk assessment on the transaction, allowing the transaction to complete without challenge if it's deemed low risk or, if it's deemed high risk, the payment will be sent to the challenge flow (or non-frictionless route). This non-frictionless 3DS requires the user to complete a challenge such as fill in a code received by SMS. If the user will not complete the challenge (leaves blank) it will be considered as an abandoned transaction, if they will fail to complete it (e.g. wrong code) it will be considered as a failed 3DS transaction.

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Country Insights

Challenger banks have the best 3DS success rate (87.2%) of all issuers, perhaps highlighting the importance of UX in signposting users through 3DS challenges

The United Kingdom

The lowest 3DS success rate on web (69.3%) and on mobile (56.6%) underscores the importance of requesting exemptions wherever appropriate

Germany

The lowest completion rate (74.79%) for 3DS transactions shows the potentially stark impact of PSD2 on revenue

France

Less than 1% of 3DS transactions were using V1 before the October 2022 sunset date, so this is unlikely to have caused significant problems

Italy

The highest exemption rate (94.55%) shows that friction can be reduced on a significant percentage of transactions if exemptions are requested when appropriate

Spain

Frictionless 3DS Rate: Frictionless 3DS removes the friction of 3DS authentication or the 3DS challenge, whilst still requesting authentication from the issuer (and allowing the liability shift). The rate is calculated by dividing the number of frictionless transactions by the total number of 3DS transactions. Non-Frictionless 3DS Rate: Non-frictionless 3DS is where the transaction is given a 3DS challenge. The rate is calculated by dividing the number of authenticated transactions by the total number of successful 3DS transactions.

Across all 5 countries, 3DS Success Rate is lower on mobile vs web, with as much as a 12.7% difference in Germany, demonstrating the gap in user experience for customers transacting on mobile devices when compared to laptop or desktop computers. Merchants should work with their 3DS providers and issuers to highlight issues and work on optimising the customer experience.

3DS Version 1 was sunsetted on the 15th October 2022, so it’s been essential to migrate to 3DS V2 for business continuity, customer experience, and to ensure continuing compliance with PSD2. This dataset is from three months before the sunsetting of V1. Across all 5 major eCommerce markets studied, usage of V1 was very low, and most 3DS transactions were being processed with V2.2. This suggests the sunsetting probably hasn’t caused much disruption for European merchants. What are the improvements with version 2? 3DS V2 allows merchants to use a frictionless payment flow by sharing extra information about the transaction such as shipping address. Using this information the issuer does a risk assessment on the transaction, allowing the transaction to complete without challenge if it's deemed low risk or, if it's deemed high risk, the payment will be sent to the challenge flow (or non-frictionless route). This 3DS flow applies friction to the transaction by making the end user complete a challenge, such as filling in a code received by SMS. If the user does not complete the challenge (leaves blank) it will be considered as an abandoned transaction, if they will fail to complete it, perhaps by using a wrong code, it will be considered as a failed 3DS transaction.

Transaction Value

The strongest 3DS success rates are for the UK, France and Spain.

Exemptions are transactions that, after a transaction risk analysis (TRA), do not go through any form of 3DS (either frictionless or non-frictionless). As part of the exemption, liability does not shift from merchant to issuer, so merchants need to feel confident that the TRA has effectively reduced the risk of fraud. If merchants try exemptions for every transaction allowed fraud to get through. The rate is calculated by dividing the number of exempted transactions by total transactions. 3DS transactions are transactions that go through a form of 3DS (either frictionless or non-frictionless). Directing customer transactions to 3DS allows merchants to shift liability for a transaction (in case of a chargeback) to the issuer. The rate is calculated by dividing the number of 3DS transactions by total transactions.

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Italy

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Italy

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The United Kingdom

Transaction Value

Exemptions Usage

Exemptions

3DS Transactions

3DS Abandonment rate

3DS Failure Rate

3DS Success Rate

Technical Issue

The Authorization Rate is the proportion of transactions that are successfully authorized. The rate is determined by dividing the number of authorized transactions by the number of authorization attempts. Failed/abandoned 3DS will not proceed to authorization. The Completion Rate is the proportion of attempted transactions that are successfully completed. The rate is determined by dividing the number of completed transactions by the number of all transaction attempts.

Authorization Rates vs. Completion Rates

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The United Kingdom

Transaction Value

Authorization Rate

Completion Rate

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Version 2.1

Version 1

3DS Success - Web

3DS Success - Mobile