Achieving PSD3 Compliance: SCA with Didit's Orchestration Engine

PSD3 Mandates Strong Customer Authentication (SCA)The upcoming PSD3 directive will reinforce the need for robust SCA, requiring at least two independent authentication elements from distinct categories: knowledge, possession, and inherence, for most electronic payments.

Balancing Security and User Experience is KeyWhile SCA enhances security, an overly complex process can lead to customer abandonment. Solutions must be intelligent, adaptable, and minimize friction for legitimate users.

Orchestration Engines Streamline ComplianceAn identity orchestration engine allows businesses to dynamically apply the right level of authentication based on risk, reducing unnecessary friction while ensuring compliance with PSD3 and other regulations.

Didit's AI-Native Platform Simplifies SCA ImplementationDidit provides a modular, developer-first platform with pre-built integrations and a no-code workflow engine, enabling businesses to quickly deploy and manage PSD3-compliant SCA measures, including advanced biometrics and liveness detection.

Understanding PSD3 and the Evolution of SCA

The financial landscape is constantly evolving, and with it, the regulatory frameworks designed to protect consumers and combat financial crime. The upcoming PSD3 (Payment Services Directive 3) is set to build upon its predecessor, PSD2, with a stronger emphasis on fraud prevention and enhanced customer security. A cornerstone of this directive is Strong Customer Authentication (SCA), which requires electronic payment service providers to verify customer identities using at least two independent authentication elements from different categories: knowledge (something the user knows, like a password), possession (something the user has, like a phone), and inherence (something the user is, like a fingerprint or face scan).

While SCA has been in place under PSD2, PSD3 aims to refine its application, close loopholes, and adapt to new fraud vectors. This means businesses operating within the EU and EEA must ensure their authentication processes are not only compliant but also future-proof. The challenge lies in implementing these robust security measures without introducing unacceptable friction for legitimate customers, which can lead to cart abandonment and lost revenue.

The Pillars of Strong Customer Authentication

For an authentication method to qualify as SCA, it must combine at least two of the following independent elements:

1. Knowledge: This includes passwords, PINs, or secret questions. The key is that only the user should know this information.
2. Possession: This refers to something the user owns, such as a mobile phone for an SMS OTP (One-Time Password), a hardware token, or a smart card.
3. Inherence: This category encompasses biometric data unique to the user, like fingerprints, facial recognition, or iris scans. These are increasingly popular due to their convenience and high security.

Crucially, these elements must be independent, meaning the compromise of one does not invalidate the others. For example, if a fraudster steals a password (knowledge), they should not automatically gain access to the possession or inherence elements. Didit's modular architecture allows businesses to easily integrate and combine various authentication methods to meet these stringent requirements, including advanced biometric checks like Passive & Active Liveness and 1:1 Face Match & Face Search.

Orchestrating SCA for Optimal Security and User Experience

Implementing SCA isn't a one-size-fits-all solution. Different transactions carry different risk levels, and applying the same high-friction authentication to every single payment can be detrimental to the user experience. This is where an identity orchestration engine becomes invaluable. An orchestration engine allows businesses to define dynamic workflows that assess risk in real-time and apply proportionate authentication measures. For instance, a low-value transaction from a trusted device might only require a single factor, while a high-value transaction from a new device would trigger full SCA, potentially involving biometric verification and multi-factor authentication.

Such an engine can incorporate various data points: IP analysis, device intelligence, transaction history, and even behavioral biometrics to make informed decisions. By intelligently orchestrating these checks, businesses can minimize friction for legitimate users while maximizing security against fraudulent activities, ensuring compliance without compromising conversion rates.

How Didit Helps Achieve PSD3 Compliance

Didit is an AI-native, developer-first identity platform uniquely positioned to help businesses achieve and maintain PSD3 compliance for SCA. Our modular architecture allows you to easily compose and orchestrate the necessary identity checks to meet regulatory demands while optimizing the user experience.

With Didit's no-code Business Console and clean APIs, businesses can design and deploy sophisticated SCA workflows that combine various authentication factors. For inherence factors, our Passive & Active Liveness detection ensures that a real person is present, preventing sophisticated spoofing attacks, while 1:1 Face Match & Face Search verifies the user against a trusted identity document or existing profile. Our ID Verification capabilities, including OCR, MRZ, and barcode scanning, can be used during initial onboarding to establish a strong identity anchor, which can then be leveraged for subsequent SCA processes. Furthermore, Didit’s Phone & Email Verification tools provide robust possession-based authentication options.

Didit's advantages include Free Core KYC, a modular architecture that enables plug-and-play identity checks, and an AI-native approach that powers intelligent, automated decisions. There are no setup fees, making it easy for businesses of all sizes to start building a compliant and secure identity infrastructure.

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