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How card payment security rules will affect brokers – Berkeley Alexander

by: Mark Hutchings, managing director of Berkeley Alexander
  • 04/11/2019
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How card payment security rules will affect brokers – Berkeley Alexander
Payment Services Directive 2 (PSD2) came into effect in September potentially impacting mortgage brokers, independent financial advisers and other intermediaries.


It will come into play when using a client’s card to pay for something online with the provider such as insurance premiums, surveys and admin fees on a mortgage application.

The payment service providers have been lobbying for an extension and, although in certain cases an extension has been granted until March 2020, on the whole the directive is now in force.

Under the new rules, for e-commerce transactions, payment service providers have to undertake strong customer authentication (SCA).

This typically uses a new two-stage authentication process that involves the payee’s bank texting the mobile number held by the bank for that client with a second stage authentication number that the client then has to provide for the payment to be made.

Payments will not go through without this second stage authentication.

It includes all goods and services, including insurance and financial services where a card is used for online payments, but not for payments where the payment provider recognises it as a distance purchase over the phone.

Distances purchases are defined as those made through digital TV, mail order, phone or text message.


Client contact

This means that going forward, if the payment service provider recognises the payment as an e-commerce transaction, agents processing card payments may also have to have the client present or on a call, to provide the adviser with the second stage authentication number.

It’s potentially another administrative step in the process, but it has been introduced with the best of intentions to reduce fraud on online card payments.

If you are unsure as to whether the payments you make on behalf of customers are classed as an e-commerce transaction, check with your product provider who will be able to clarify that and tell you what, if any, impact there could be to your process.



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