Europe’s New Payment Rules Are Forcing Fintechs to Rethink Fraud Data

European fintechs are having to take a harder look at how their payment systems handle fraud data as the EU moves towards PSD3 and the new Payment Services Regulation.

The changes are not just another compliance exercise. The agreed rules give payment service providers more responsibility for preventing fraud and, in some circumstances, paying for losses when they fail to put proper controls in place. Firms will also have to check whether a payee’s name matches the account details and take action when the information does not line up.

That puts the way firms collect, share and use fraud information under a much brighter spotlight. The EU package is designed to make it easier for payment providers to share fraud related information with each other, while also strengthening customer authentication and other fraud prevention measures.

For fintechs, the awkward part is that fraud data rarely sits neatly in one system. Transaction monitoring, customer identity checks, payment history and external fraud signals can live across different platforms and providers. Making those systems work together is the less glamorous part of getting ready for the new rules, but it is probably where much of the real work will happen.

The rules are also intended to give customers stronger protection when they are caught by scams. In cases of impersonation fraud, for example, the agreed text provides for full reimbursement where the required conditions are met.

So PSD3 is not simply a new rulebook for European payments. It is pushing payment firms towards a different approach to fraud, one where sharing the right information quickly can matter almost as much as spotting the suspicious transaction in the first place.

Fintech, Payments, Financial Regulation, Fraud Prevention, Banking, European Union, Digital Payments, Financial Crime