Also called: Payment Services Directive 2, Second Payment Services Directive, Revised Payment Services Directive, Payment Services Directive (PSD)
What PSD2 is
PSD2, Directive (EU) 2015/2366, is the Second Payment Services Directive. It sets a framework for retail payments and payment services across the European Union, including domestic and cross-border payments in euros and other currencies. EU member states had to implement it into national law by January 13, 2018.
The directive covers more than card security. It also sets rules for payment service providers and lets regulated third parties access payment-account data or initiate payments when a customer gives permission. Those services are part of what is commonly called open banking.
PSD2 does not add a standard merchant fee, but its authentication and surcharge rules can change how European payments reach checkout.
How PSD2 relates to SCA
Strong Customer Authentication (SCA) is one requirement under PSD2, not another name for the directive. SCA rules applied from September 2019. For covered online payments, authentication uses at least two independent factors from knowledge, possession or inherence, such as a password and a phone.
For your business, the practical effect is at checkout: banks and payment providers must apply SCA when the rules require it, and your payment flow needs to support the authentication request. 3-D Secure is one method used to run card authentication. The rules can affect payments handled by European processing entities even when your company is based in the United States.
What PSD2 means for your costs
PSD2 does not set a standard processing fee that a provider charges your business. Your costs come from the payment service and checkout work needed for transactions in scope, while additional authentication steps can interrupt checkout and leave a customer unable to complete a purchase.
Surcharge rules can also affect your pricing. Since January 13, 2018, covered merchants cannot add a surcharge for consumer credit or debit card payments covered by the ban, or for certain euro direct debit and credit transfer payments. The rules depend on the payment and the locations of the relevant providers, and individual European countries can restrict surcharging further. PSD2 does not require you to add a surcharge.
What you can actually change
Your business cannot change PSD2 or decide which transactions fall under European rules. You can make the checkout ready for in-scope payments and keep your payment pricing aligned with the rules that apply to each sale.
- Identify whether your European sales use acquiring and issuing processing entities covered by PSD2.
- Confirm your online checkout supports required SCA flows, including 3-D Secure for card payments.
- Review any payment-method surcharge against the transaction type and the countries involved.
- Track authentication-related declines and checkout abandonment separately from processing fees.
- Map your transactions. List the countries involved and the acquiring and issuing entities handling your European payments.
- Test authentication flows. Run a checkout test for in-scope online payments and confirm the required SCA step reaches the customer.
- Review surcharge settings. Check that your checkout does not add payment-method fees where the applicable European rules prohibit them.
Frequently asked questions
Does PSD2 apply to a US business?
PSD2 is European law, not a general US payment rule. A US business can encounter it when a transaction and the payment entities handling it fall within the rules, so a US headquarters alone does not determine whether a payment is in scope.
Is PSD2 the same as Strong Customer Authentication?
No. PSD2 is the broader directive for payment services, while Strong Customer Authentication is one security requirement under it. SCA rules applied from September 2019, and 3-D Secure is one way to carry out card authentication.
Does PSD2 charge merchants a payment-processing fee?
No standard PSD2 processing fee is charged to merchants by the directive. Your business can have costs related to checkout changes or payment services, and applicable surcharge rules can limit how you pass payment costs to customers.