Commission Delegated Regulation (EU) 2018/389 of 27 November 2017 supplementing Directive (EU) 2015/2366 of the European Parliament and of the Council with regard to regulatory technical standards for strong customer authentication and common and secure open standards of communication (Text with EEA relevance. )

CHAPTER I

GENERAL PROVISIONS

Article 1

Subject matter

This Regulation establishes the requirements to be complied with by payment service providers for the purpose of implementing security measures which enable them to do the following:

(a) apply the procedure of strong customer authentication in accordance with Article 97 of Directive (EU) 2015/2366;

(b) exempt the application of the security requirements of strong customer authentication, subject to specified and limited conditions based on the level of risk, the amount and the recurrence of the payment transaction and of the payment channel used for its execution;

(c) protect the confidentiality and the integrity of the payment service user's personalised security credentials;

(d) establish common and secure open standards for the communication between account servicing payment service providers, payment initiation service providers, account information service providers, payers, payees and other payment service providers in relation to the provision and use of payment services in application of Title IV of Directive (EU) 2015/2366.

Article 2

General authentication requirements

Those mechanisms shall be based on the analysis of payment transactions taking into account elements which are typical of the payment service user in the circumstances of a normal use of the personalised security credentials.

Payment service providers shall ensure that the transaction monitoring mechanisms take into account, at a minimum, each of the following risk-based factors:

(a) lists of compromised or stolen authentication elements;

(b) the amount of each payment transaction;

(c) known fraud scenarios in the provision of payment services;

(d) signs of malware infection in any sessions of the authentication procedure;

(e) in case the access device or the software is provided by the payment service provider, a log of the use of the access device or the software provided to the payment service user and the abnormal use of the access device or the software.

Article 3

Review of the security measures

However, payment service providers that make use of the exemption referred to in Article 18 shall be subject to an audit of the methodology, the model and the reported fraud rates at a minimum on a yearly basis. The auditor performing this audit shall have expertise in IT security and payments and be operationally independent within or from the payment service provider. During the first year of making use of the exemption under Article 18 and at least every 3 years thereafter, or more frequently at the competent authority's request, this audit shall be carried out by an independent and qualified external auditor.

The entire report shall be made available to competent authorities upon their request.

CHAPTER II

SECURITY MEASURES FOR THE APPLICATION OF STRONG CUSTOMER AUTHENTICATION

Article 4

Authentication code

The authentication code shall be only accepted once by the payment service provider when the payer uses the authentication code to access its payment account online, to initiate an electronic payment transaction or to carry out any action through a remote channel which may imply a risk of payment fraud or other abuses.

For the purpose of paragraph 1, payment service providers shall adopt security measures ensuring that each of the following requirements is met:

(a) no information on any of the elements referred to in paragraph 1 can be derived from the disclosure of the authentication code;

(b) it is not possible to generate a new authentication code based on the knowledge of any other authentication code previously generated;

(c) the authentication code cannot be forged.

Payment service providers shall ensure that the authentication by means of generating an authentication code includes each of the following measures:

(a) where the authentication for remote access, remote electronic payments and any other actions through a remote channel which may imply a risk of payment fraud or other abuses has failed to generate an authentication code for the purposes of paragraph 1, it shall not be possible to identify which of the elements referred to in that paragraph was incorrect;

(b) the number of failed authentication attempts that can take place consecutively, after which the actions referred to in Article 97(1) of Directive (EU) 2015/2366 shall be temporarily or permanently blocked, shall not exceed five within a given period of time;

(c) the communication sessions are protected against the capture of authentication data transmitted during the authentication and against manipulation by unauthorised parties in accordance with the requirements in Chapter V;

(d) the maximum time without activity by the payer after being authenticated for accessing its payment account online shall not exceed 5 minutes.

The payer shall be alerted before the block is made permanent.

Where the block has been made permanent, a secure procedure shall be established allowing the payer to regain use of the blocked electronic payment instruments.

Article 5

Dynamic linking

Where payment service providers apply strong customer authentication in accordance with Article 97(2) of Directive (EU) 2015/2366, in addition to the requirements of Article 4 of this Regulation, they shall also adopt security measures that meet each of the following requirements:

(a) the payer is made aware of the amount of the payment transaction and of the payee;

(b) the authentication code generated is specific to the amount of the payment transaction and the payee agreed to by the payer when initiating the transaction;

(c) the authentication code accepted by the payment service provider corresponds to the original specific amount of the payment transaction and to the identity of the payee agreed to by the payer;

(d) any change to the amount or the payee results in the invalidation of the authentication code generated.

For the purpose of paragraph 1, payment service providers shall adopt security measures which ensure the confidentiality, authenticity and integrity of each of the following:

(a) the amount of the transaction and the payee throughout all of the phases of the authentication;

(b) the information displayed to the payer throughout all of the phases of the authentication including the generation, transmission and use of the authentication code.

For the purpose of paragraph 1(b) and where payment service providers apply strong customer authentication in accordance with Article 97(2) of Directive (EU) 2015/2366 the following requirements for the authentication code shall apply:

(a) in relation to a card-based payment transaction for which the payer has given consent to the exact amount of the funds to be blocked pursuant to Article 75(1) of that Directive, the authentication code shall be specific to the amount that the payer has given consent to be blocked and agreed to by the payer when initiating the transaction;

(b) in relation to payment transactions for which the payer has given consent to execute a batch of remote electronic payment transactions to one or several payees, the authentication code shall be specific to the total amount of the batch of payment transactions and to the specified payees.

Article 6

Requirements of the elements categorised as knowledge

Article 7

Requirements of the elements categorised as possession

Article 8

Requirements of devices and software linked to elements categorised as inherence

Article 9

Independence of the elements

For the purposes of paragraph 2, the mitigating measures shall include each of the following:

(a) the use of separated secure execution environments through the software installed inside the multi-purpose device;

(b) mechanisms to ensure that the software or device has not been altered by the payer or by a third party;

(c) where alterations have taken place, mechanisms to mitigate the consequences thereof.

CHAPTER III

EXEMPTIONS FROM STRONG CUSTOMER AUTHENTICATION

Article 10

Access to the payment account information directly with the account servicing payment service provider

Payment service providers shall be allowed not to apply strong customer authentication, subject to compliance with the requirements laid down in Article 2, where a payment service user is accessing its payment account online directly, provided that access is limited to one of the following items online without disclosure of sensitive payment data:

(a) the balance of one or more designated payment accounts;

(b) the payment transactions executed in the last 90 days through one or more designated payment accounts.

By way of derogation from paragraph 1, payment service providers shall not be exempted from the application of strong customer authentication where one of the following conditions is met:

(a) the payment service user is accessing online the information specified in paragraph 1 for the first time;

(b) more than 180 days have elapsed since the last time the payment service user accessed online the information specified in paragraph 1 and strong customer authentication was applied.

Article 10a

Access to the payment account information through an account information service provider

Payment service providers shall not apply strong customer authentication where a payment service user is accessing its payment account online through an account information service provider, provided that access is limited to one of the following items online without disclosure of sensitive payment data:

(a) the balance of one or more designated payment accounts;

(b) the payment transactions executed in the last 90 days through one or more designated payment accounts.

By way of derogation from paragraph 1, payment service providers shall apply strong customer authentication where one of the following conditions is met:

(a) the payment service user is accessing online the information specified in paragraph 1 for the first time through the account information service provider;

(b) more than 180 days have elapsed since the last time the payment service user accessed online the information specified in paragraph 1 through the account information service provider and strong customer authentication was applied.

Article 11

Contactless payments at point of sale

Payment service providers shall be allowed not to apply strong customer authentication, subject to compliance with the requirements laid down in Article 2, where the payer initiates a contactless electronic payment transaction provided that the following conditions are met:

(a) the individual amount of the contactless electronic payment transaction does not exceed EUR 50; and

(b) the cumulative amount of previous contactless electronic payment transactions initiated by means of a payment instrument with a contactless functionality from the date of the last application of strong customer authentication does not exceed EUR 150; or

(c) the number of consecutive contactless electronic payment transactions initiated via the payment instrument offering a contactless functionality since the last application of strong customer authentication does not exceed five.

Article 12

Unattended terminals for transport fares and parking fees

Payment service providers shall be allowed not to apply strong customer authentication, subject to compliance with the requirements laid down in Article 2, where the payer initiates an electronic payment transaction at an unattended payment terminal for the purpose of paying a transport fare or a parking fee.

Article 13

Trusted beneficiaries

Article 14

Recurring transactions

Article 15

Credit transfers between accounts held by the same natural or legal person

Payment service providers shall be allowed not to apply strong customer authentication, subject to compliance with the requirements laid down in Article 2, where the payer initiates a credit transfer in circumstances where the payer and the payee are the same natural or legal person and both payment accounts are held by the same account servicing payment service provider.

Article 16

Low-value transactions

Payment service providers shall be allowed not to apply strong customer authentication, where the payer initiates a remote electronic payment transaction provided that the following conditions are met:

(a) the amount of the remote electronic payment transaction does not exceed EUR 30; and

(b) the cumulative amount of previous remote electronic payment transactions initiated by the payer since the last application of strong customer authentication does not exceed EUR 100; or

(c) the number of previous remote electronic payment transactions initiated by the payer since the last application of strong customer authentication does not exceed five consecutive individual remote electronic payment transactions.

Article 17

Secure corporate payment processes and protocols

Payment service providers shall be allowed not to apply strong customer authentication, in respect of legal persons initiating electronic payment transactions through the use of dedicated payment processes or protocols that are only made available to payers who are not consumers, where the competent authorities are satisfied that those processes or protocols guarantee at least equivalent levels of security to those provided for by Directive (EU) 2015/2366.

Article 18

Transaction risk analysis

An electronic payment transaction referred to in paragraph 1 shall be considered as posing a low level of risk where all the following conditions are met:

(a) the fraud rate for that type of transaction, reported by the payment service provider and calculated in accordance with Article 19, is equivalent to or below the reference fraud rates specified in the table set out in the Annex for ‘remote electronic card-based payments’ and ‘remote electronic credit transfers’ respectively;

(b) the amount of the transaction does not exceed the relevant exemption threshold value (‘ETV’) specified in the table set out in the Annex;

(c) payment service providers as a result of performing a real time risk analysis have not identified any of the following: (i) abnormal spending or behavioural pattern of the payer; (ii) unusual information about the payer's device/software access; (iii) malware infection in any session of the authentication procedure; (iv) known fraud scenario in the provision of payment services; (v) abnormal location of the payer; (vi) high-risk location of the payee.

Payment service providers that intend to exempt electronic remote payment transactions from strong customer authentication on the ground that they pose a low risk shall take into account at a minimum, the following risk-based factors:

(a) the previous spending patterns of the individual payment service user;

(b) the payment transaction history of each of the payment service provider's payment service users;

(c) the location of the payer and of the payee at the time of the payment transaction in cases where the access device or the software is provided by the payment service provider;

(d) the identification of abnormal payment patterns of the payment service user in relation to the user's payment transaction history.

The assessment made by a payment service provider shall combine all those risk-based factors into a risk scoring for each individual transaction to determine whether a specific payment should be allowed without strong customer authentication.

Article 19

Calculation of fraud rates

The overall fraud rate for each type of transaction shall be calculated as the total value of unauthorised or fraudulent remote transactions, whether the funds have been recovered or not, divided by the total value of all remote transactions for the same type of transactions, whether authenticated with the application of strong customer authentication or executed under any exemption referred to in Articles 13 to 18 on a rolling quarterly basis (90 days).

Article 20

Cessation of exemptions based on transaction risk analysis

Article 21

Monitoring

In order to make use of the exemptions set out in Articles 10 to 18, payment service providers shall record and monitor the following data for each type of payment transactions, with a breakdown for both remote and non-remote payment transactions, at least on a quarterly basis:

(a) the total value of unauthorised or fraudulent payment transactions in accordance with Article 64(2) of Directive (EU) 2015/2366, the total value of all payment transactions and the resulting fraud rate, including a breakdown of payment transactions initiated through strong customer authentication and under each of the exemptions;

(b) the average transaction value, including a breakdown of payment transactions initiated through strong customer authentication and under each of the exemptions;

(c) the number of payment transactions where each of the exemptions was applied and their percentage in respect of the total number of payment transactions.

CHAPTER IV

CONFIDENTIALITY AND INTEGRITY OF THE PAYMENT SERVICE USERS' PERSONALISED SECURITY CREDENTIALS

Article 22

General requirements

For the purpose of paragraph 1, payment service providers shall ensure that each of the following requirements is met:

(a) personalised security credentials are masked when displayed and are not readable in their full extent when input by the payment service user during the authentication;

(b) personalised security credentials in data format, as well as cryptographic materials related to the encryption of the personalised security credentials are not stored in plain text;

(c) secret cryptographic material is protected from unauthorised disclosure.

Article 23

Creation and transmission of credentials

Payment service providers shall ensure that the creation of personalised security credentials is performed in a secure environment.

They shall mitigate the risks of unauthorised use of the personalised security credentials and of the authentication devices and software following their loss, theft or copying before their delivery to the payer.

Article 24

Association with the payment service user

For the purpose of paragraph 1, payment service providers shall ensure that each of the following requirements is met:

(a) the association of the payment service user's identity with personalised security credentials, authentication devices and software is carried out in secure environments under the payment service provider's responsibility comprising at least the payment service provider's premises, the internet environment provided by the payment service provider or other similar secure websites used by the payment service provider and its automated teller machine services, and taking into account risks associated with devices and underlying components used during the association process that are not under the responsibility of the payment service provider;