An Introduction to the Regulatory Technical Standards for Strong Customer Authentication – Part 2: PSD2

The Revised Payment Service Directive (PSD2) is nothing short of revolutionary when it comes to the retail payment services industry in Europe. In fact, many of the innovative new products and services that PSD2 will indirectly create are likely to percolate to every sector of the economy.

In part 1 of this series, we had a close look at eIDAS and strong customer authentication. This sequel looks at PSD2.

It finally allows for the creation of a true platform economy in financial services which is just what was needed to kick start innovation. This is what will allow banks and financial services companies to benefit from crowd-sourced innovation which works so well in sectors like technology.

Comprehensive as it is, PSD2 is still just one piece of the puzzle. A business process has a lot of moving parts and for PSD2 to succeed, the EU has to ensure that all the supporting directives and regulations are in place as well. One example might be eIDAS which provides for the use of electronic identification and trust services across all Member States.

And when it comes to Strong Customer Authentication (which is a mandatory requirement under PSD2), it is the Regulatory Technical Standards which complete that picture.

PSD2 and RTS

Article 97 of PSD2 covers the authentication requirements. Strong Customer Authentication (SCA) is a mandatory requirement whenever a user has to access his or her account online, initiate a transaction or perform any other remote action which has a risk of fraud or other such abuse.

There are obviously exemptions like for small value or recurring transactions because that may cause unnecessary disruption for the user. Additionally, the requirements for setting dynamic thresholds and performing real time fraud analysis mean that emerging threats/ situations can be detected in real time. 

Another important element is dynamic linking transactions to specific amounts and payees. This means, for example, that authentication codes are generated for specific amounts and specific payees only and can’t be intercepted and misused for a different, fraudulent transaction.

This is just one small example of the much larger security system that RTS and Strong Customer Authentication will enable for the industry.

Transaction Risk Analysis 

This is one of the more interesting aspects covered by the RTS. Risk analysis is nothing new and banks and other service providers do it on a real time basis as well. But with the very specific requirements laid out in the RTS, it means that risk analysis will become an elemental requirement which will have a basic minimum threshold across the EU. This not only means that the playing field will be leveled, but it also means that customers will have more choice. And even service providers will benefit because with a defined basic minimum standard, they will be able to buy off-the-shelf solutions for cheaper. 

The European Banking Authority (and other competent bodies) will also have access to the results of these risk analyses and fraud rates which highlights that the regulatory focus is just not financial health but also on cyber security. 


RTS covers a number of elements which relate to transactional security – like traceability, obligation for access interfaces, delivery of credentials etc.  But the gist of it is that it is the perfect supporting directive to an already comprehensive PSD2 and just brings in more clarity. Considering how tricky it can be to navigate complex and old directives across multiple countries, this is a welcome change.

Part 3 of this series shows how the Regulatory Technical Standards lay groundwork for transactional security. 

References and further reading

About the author

Ulrich Scholten is an internationally active entrepreneur and scientist. He holds a PhD in information technology and owns several patents on cloud-based sensors. His research on cloud computing is regularly published in highly rated journals and conference papers. From 2008 - 2015, he was associated research scientist at the Karlsruhe Service Research Institute (KSRI), a partnership by KIT and IBM, where he researched network effects around web-platforms together with SAP Research.

To find more blog posts related with below topics, click on one of the keywords:

How can we help you?

Talk to one of our specialists and find out how Utimaco can support you today.
You have selected two different types of downloads, so you need to submit different forms which you can select via the two tabs.

Your download request(s):

    By submitting below form you will receive links for your selected downloads.

    Your download request(s):

      For this type of documents, your e-mail address needs to be verified. You will receive the links for your selected downloads via e-mail after submitting below form.

      About Utimaco's Downloads

      Visit our Downloads section and select from resources such as brochures, data sheets, white papers and much more. You can view and save almost all of them directly (by clicking the download button).

      For some documents, your e-mail address needs to be verified. The button contains an e-mail icon.

      Download via e-mail


      A click on such a button opens an online form which we kindly ask you to fill and submit. You can collect several downloads of this type and receive the links via e-mail by simply submitting one form for all of them. Your current collection is empty.