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As of January 1, 2021, the Payment Services Directive (PSD2) applies within all of the European Economic Area (EEA). Before then, merchants could choose whether or not to activate strong authentication. This decision now rests with the issuing bank. In France, the Banque de France implemented a migration plan that ran until April 2021, encouraging merchants to gradually move towards compliance. That plan posed a major logistical challenge for retailers and its impact on customer conversion has undoubtedly been significant.
We spoke with Jordan Fresco, Payments Lead at Vestiaire Collective, about the company's compliance plan and what he feels is the critical role of payment processors’ in maximizing successful transactions in the PSD2 era.
Founded in 2009, Vestiaire Collective is a French marketplace specializing in high-end fashion recommerce (second-hand shopping) and, notably, authenticating all of the goods that go through its network. It’s available in over 80 countries across Europe, America, Southeast and Northeast Asia, and has a community of more than 11 million registered members.
With a high average shopping cart value of around €300, having to implement new strong authentication rules has naturally raised many concerns for the company. Its main challenge was limiting authentication's impact on conversions by improving the success rate, and reducing both abandonment and challenge rates:
According to Jordan Fresco, "For us, the challenge of compliance with PSD2 and with 3DS2 protocol is maintaining the payment experience for the user, ensuring it's still fluid at every stage." When PSD2 came into effect, Vestiaire Collective realized how complicated it was: "We didn't have time to deal with PSD2's complexity. We would have needed a very substantial payment team to handle it ourselves." The company decided to turn to us to handle the entire compliance process.
Partnering with Adyen since 2015, Vestiaire Collective launched its redesigned payment page halfway through 2020. The website first migrated to Adyen's new checkout API page and then integrated 3DS2 into its website and mobile applications.
We developed our own in-house 3DS server so our customers could benefit from a single platform. This meant our strong authentication protocol was integrated into the Vestiaire Collective checkout API and into its mobile applications via SDKs (Software Development Kits). According to Jordan Fresco, "we worked closely with the Adyen team on the configuration of 3D Secure 2 to ensure that users would be impacted as little as possible. This means, for instance, an automatic fallback to 3D Secure 1 if 3D Secure 2 is not responding well, and plenty of other little details that Adyen takes care of to limit the impact on the conversion rate."
Within the EEA, each national regulatory authority has created its own migration plan, so naturally it can be difficult to sift through the relevant details. This, however, was a complexity that Vestiaire Collective did not have to face: "The Adyen teams make sure that merchants don't have to worry about problems like these."
Full compliance with PSD2 was achieved during Christmas week, a few days before the European deadline. For Jordan Fresco, "it was a challenge for us. We thought we were falling behind but in the end, with Adyen's help, we managed to reach our goals!"
Strong authentication requests that lead to unsuccessful card payments don't have to mean abandoned transactions. Vestiaire Collective can win back some purchases, thanks to the different payment methods offered through Adyen: "To secure purchases, PayPal is a smart option. Since January, we have observed a positive correlation between declining strong authentication rates and conversion rates through PayPal, which is the preferred method for card fallbacks." Vestiaire Collective is also noticing a shift to Apple Pay on iOS for mobile devices, a sign of the growing popularity of digital wallets.
Within the EEA, there are significant differences when it comes to strong authentication demands. For Vestiaire Collective, the challenge rate may reach 65% in France on mobiles, whereas in other countries such as Spain, Austria, or Ireland, it's between 20 and 50%. So it's important to develop a strategy for each market. According to Jordan Fresco, "I'd encourage merchants using 3DS2 to be proactive and analyze each country's performance, and to work with their PSP to make the best decisions." Back in January, faced with a traffic problem related to the new 3DS2 infrastructure in Spain, we quickly guaranteed Vestiaire Collective an automatic fallback to 3DS1, to protect its sales.
"It's in merchants' best interests to have a very close relationship with their PSP in the coming weeks and months, if they're going to be able to react quickly and efficiently."
Now, when it comes to strong authentication, Vestiaire Collective is wondering if other regions will also implement similar rules to PSD2, and with good reason. But given our international presence, we’ll always be able to help the marketplace overcome new challenges and support its growth. For Jordan Fresco, "Adyen's strength is in its ability to simplify payment acceptance for a retailer, make it look easy, and be proactive when it comes to integrating the latest regulations or new payment methods worldwide. They're good at bringing out products with real added value."
With our help, Vestiaire Collective was able to guarantee its full compliance with the new standards set out by PSD2 and minimize the impact of the new strong authentication rules on its conversion rate. The success rate is gradually improving and the marketplace can now confidently address any new payment regulations that crop up in other parts of the world.
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