PSD2 Compliance and Regulations: What It Means for Hotel Payments

Ah, nothing says ‘welcome to our hotel’ like a data breach, right?

And that’s why keeping guests’ payment information safe is super important. A study by Cornell University and FreedomPay found that almost 31% of hotels have had their data hacked, and 89% of them had more than one hack in a single year.

These hacks can really hurt a hotel’s reputation and cost a lot of money. For example, in 2023, the average cost of a data breach in the hotel industry was $3.36 million, which is up from $2.94 million in 2022.

To mitigate these risks, hotels operating in Europe must follow the compliance requirements set by the Payment Services Directive 2 (PSD2). Meanwhile, hotels located outside of Europe must adhere to the Payment Card Industry Data Security Standard (PCI DSS), a global security framework established by major credit card networks to protect cardholder data.

PCI DSS sets strict guidelines on how businesses store, process, and transmit payment information, requiring measures such as encryption, access controls, and regular security audits. Compliance with PSD2 and PCI DSS is crucial to preventing data breaches, avoiding costly fines, and maintaining guest trust. Don’t worry about the acronyms; just stay with us.

What is PSD2 Compliance?

PSD2 (Payment Services Directive 2) is a European regulation designed to enhance security, promote competition, and improve consumer protection in digital payments. This directive requires businesses, including hotels, to implement Strong Customer Authentication (SCA) for online payments, making transactions more secure and reducing fraud risks.

SCA requires at least two of the following three authentication factors when processing a guest’s payment:

Why is PSD2 Compliance important for hotels?

Put simply: it’s to avoid declined transactions and ensure seamless guest experiences. Non-compliance can lead to payment failures, increased fraud risks, and legal consequences.

Here’s a breakdown of why PSD2 compliance is essential:

How does PSD2 affect your direct bookings?

With PSD2 in place, hotels that accept direct online bookings must ensure their payment process includes SCA to prevent declined transactions. Without SCA, banks and payment providers are required to reject transactions that don’t meet the authentication standards, as they are considered non-compliant with PSD2 regulations.

This means payments without at least two-factor authentication, such as a password and a biometric confirmation, may fail, leading to lost revenue and disrupted guest experiences. Many hotels are now adopting 3D Secure 2 (3DS2) to enhance authentication without adding friction to the guest experience.

What types of payments require SCA under PSD2?

Now, here’s the caveat with PSD2 compliance: not all payments fall under PSD2’s SCA requirements. Understanding which transactions will need authentication helps you avoid unnecessary disruptions.

Payments that require SCA include:

✅Online credit card payments made by guests directly
✅Transactions above a certain threshold
✅First-time guest transactions

Exemptions apply to:

❌Recurring transactions (like subscriptions or membership fees)
❌Low-value transactions below a specific amount
❌Corporate card payments

How RoomRaccoon ensures PSD2 compliance for your property

RoomRaccoon’s integrated payment system is designed to keep your hotel fully compliant with PSD2 regulations, ensuring secure and seamless transactions for both you and your guests. Here’s how RoomRaccoon’s payment solution already meets PSD2 compliance requirements:

• PSD2-compliant payment gateway: RoomRaccoon’s payment solution supports SCA and enables frictionless, secure transactions.

• Built-in 3D secure (3DS) authentication: Guest payments are automatically verified using 3DS technology, minimizing disruptions while reducing fraud risks.

• Optimised booking and payment processes: RoomRaccoon’s booking engine, online check-in, online check-out, and payment request links are fully compatible with PSD2, ensuring a smooth and compliant payment experience.

• Hotel staff prepared for PSD2 compliance – With automated, PSD2-compliant payment processing, staff can confidently handle transactions without the need for manual authentication checks.

• Advanced fraud detection and monitoring – RoomRaccoon’s system continuously monitors transactions, detecting and preventing suspicious activities to enhance security and minimize chargebacks.
  

Frequently Asked Questions About PSD2 Compliance for Hotels

1. What is the difference between PSD2 and PCI DSS?

PSD2 is a European regulation that enhances security for online payments and promotes Open Banking, requiring SCA for electronic transactions. It applies to hotels operating in the European Economic Area (EEA).
PCI DSS is a global security standard created by major credit card networks to protect cardholder data. It applies to any hotel worldwide that processes, stores, or transmits credit card payments, ensuring secure handling of payment data through encryption, access controls, and regular security audits.

2. Does PSD2 apply to all hotel payments?

No, PSD2 primarily applies to online and electronic transactions within the EEA. In-person payments made via card terminals (chip & PIN or contactless) are generally exempt from SCA. However, online bookings, prepayments, and remote transactions must comply with PSD2 regulations.

Non-compliance with PSD2 can lead to declined transactions, lost revenue, and potential penalties from financial institutions. If your payment process lacks SCA where required, banks may reject payments, frustrating guests and increasing booking abandonment rates.

4. How does RoomRaccoon help hotels stay PSD2 compliant?

RoomRaccoon’s integrated payment system automatically ensures PSD2 compliance by supporting SCA and 3DS for online transactions. With secure payment links, automated authentication, and fraud detection tools, you can process guest payments while meeting regulatory requirements.

By using an all-in-one payment system, your property stays PSD2 compliant effortlessly, providing guests with a secure and hassle-free payment experience. Book a demo now and get all the tools you need, all in one platform.