The security of retail payment instruments: evidence from supervisory data

The Bank of Italy today publishes 'The security of retail payment instruments: evidence from supervisory data', the new issue of the series 'Markets, infrastructures, payment systems'.

This paper provides an overview of retail payments security and assesses the impact of the new strong customer authentication (SCA) requirements introduced by the revised Payment Services Directive (PSD2) on the security of remote payments. For each payment instrument, we construct aggregate risk indicators and compare the security of domestic and cross-border payments, as well as of payments made remotely and at the physical point of sale.

Using a model for panel data, we estimate that SCA reduces the risk of fraud by 60 per cent for remote payments made by card and by 80 per cent for e-money payments. We also find that the transactions for which the regulation provides an exemption from SCA requirements are relatively safe.