Whether you’re an indie or enterprise game developer, when something comes up that can change the payment industry forever, you’ll want to pay attention. In the case of PSD2, which took effect in January 2018, change is already resonating across the payments landscape. If you’re not already familiar with the new directive, you’ll want to understand what changes are happening and how they impact you.
We know that sorting through the details of regulations like PSD2 takes time—time that you’d rather be spending on your games. That’s why we’ve rounded up all the essential information in this quick and easy post. Read on to find out what game developers need to know, do and expect from PSD2.
PSD2 is a payment services directive, initiated by the European Union, that creates new opportunities for competition in electronic payments and enables greater choice and protection for consumers. It’s an updated version of an earlier directive, one that provided the foundation for SEPA (Single Euro Payments Area) by setting rules and guidelines for faster and less expensive payments across borders in the EU.
Unlike the original directive, PSD2 applies to all EU transactions—even when the merchant is based elsewhere—so it has a much broader impact. That means PSD2 matters to EU-based game developers and anyone marketing to EU audiences. Given the European Union is among the world’s biggest economies, if you plan to go big, you’ll want to understand PSD2.
PSD2 will have a significant impact on payments because it enables more payment options and better protection for consumers and transactions. More specifically:
In many EU countries, online banking aggregators, like Klarna in Germany or EPS in Austria, dominate the market, limiting payment options.
PSD2 addresses this by requiring banks to give third parties access to consumer accounts, enabling those third parties to build new financial tools and services on top of the bank’s infrastructure. When more companies are empowered to create new solutions, more options become available to consumers.
This new competition will lead to better experiences, such as more convenient checkouts, and drive down the cost of transactions. Not only will online banking customers see less expensive payments, the directive also bans surcharges for the use of credit cards.
Naturally, third-party access to consumer bank accounts raises concerns around privacy and security. PSD2 addresses this by introducing strict requirements to reduce the risk of fraud and protect the confidentiality of financial and personal data.
More precisely, to comply with PSD2, a payment initiation service provider (PISP) needs to incorporate more advanced authentication methods into identity validation, such as voice or fingerprint. This is known simply as strong customer authentication or SCA.
PSD2 also impacts refunds. You may already be familiar with the “rule of the unconditional right of refund” which applies to direct debits up until 8 weeks after payment. With PSD2, this rule becomes a legal requirement. Some merchants may need to update refund policies as a result.
Now that we’ve covered the basics of PSD2, what does it mean for your games? After an exhaustive review of the directive, our legal counsel determined that the requirements do not fall on the merchants—or, in your case, game developers. You don’t need to change how you operate and you won’t need to make any changes to your Xsolla account. Everything will proceed as normal.
There is one exception: With PSD2, merchants have the option to become a payment initiator themselves, working directly with the banks, through open APIs, to handle customer transactions. We don’t recommend this route because it’s labor intensive—talk about taking time away from your games—but, in this scenario, a merchant would need to comply with the directive.
Some of the tighter security measures won’t become applicable until later this year but, otherwise, PSD2 is currently in effect. While you don’t need to take any actions, you will notice changes in the marketplace, like more financial services offerings, lower fees, and better transaction experiences. It’s a shift that should serve the consumer well, including your players, and can help stimulate growth for the online video game industry.
If you have further questions about payments and your Xsolla account, contact us at firstname.lastname@example.org.