The future of online payments

The future of online payments

Daniel Fluskey | 2 April 2019

Daniel Fluskey, our Head of Policy and External Affairs, summarises the future of online payment as the new Payment Services Directive (EU wide legislation) is due to come into force in September, following an event last month.

The way that we pay for things online is going to change. That was made (scarily) clear at an event on the future of digital payments that the IoF partnered on with UK Finance, Open, and hosted at Osborne Clarke.

I left having both learned a lot, and at the same time being pretty confused. But I take that as a good thing, because as the saying goes “if you think you know what’s going on, you haven’t been paying attention.” And there is something happening that is worth paying attention to. The new Payment Services Directive (EU wide legislation) is coming into force in September. That will bring with it, among other things, a need for Strong Customer Authentication (SCA) for digital payments. It’s intended to reduce fraud and make digital payments more secure. And it will. But at the same time, it will also bring in a bit more ‘friction’ in the payment process, requiring people to have to do more to prove that they are them in order to process a payment. That means that for supporters making digital donations, their journey is going to take a bit longer and a bit more disrupted. So the holy grail of online fundraising (make it quick, make it easy) is going to be a bit more challenging.

From September onwards, people are going to need to do two out of three things to make digital payments. It’s two of: something the customer knows, something they possess or something they are. For example, this could be a combination of a password, a thumbprint scan, or inputting a pin code sent to a mobile device which is then submitted online. Or it might be more examples of those picture boxes where you need to select all the squares that have traffic lights. There will be a range of things, and different payment providers will be using different ones, so it’s worth a conversation with the ones you use to see what their plans are.

It won’t affect every donation though. There is a limit that will be set under which payments will go through without the need for SCA (the equivalent of 30 Euros) and it won’t impact on contactless payments or direct debits. But someone going on your website, or using a third party, to donate say £50 to you, will have to do more. It’s not just charities that this will apply to – it’s all online transactions – so hopefully two things will happen: payment providers will innovate and make this as smooth and easy a process as possible, and also that people will become more used to and familiar with needing to this as they make a range of other purchases and online transactions. But there are things charities can and should be doing to proactively prepare and get ready.

UK Finance have produced a briefing with some key takeaways from the event, and thoughts on how the charity sector can embrace the changes in a way that will work best for their supporters. Do take a look and see what steps your organisation might need to take to get ready.

Daniel Fluskey, Head of Policy and External Affairs, Institute of Fundraising