European e-commerce is risking a €12 billion loss due to excessive transaction friction, according to a new report.

The research from Riskified looks at how PSD2 impacts fraudulent activity and fraud prevention.

The fraud-prevention software company said that the study indicates misalignment between the regulatory TRA exemption threshold values and the actual risk-profile pattern of e-commerce transactions.

According to this policy memo, €12 billion worth of card-not-present transactions currently hang in the balance due to excessive friction, which is a result of stringent TRA thresholds set by regulators.

“Our report indicates that fraudsters are already hard at work looking for loopholes in the authentication and payment processes,” said Doron Weitz, head of PSD2 product marketing at Riskified. “So, to ensure eCommerce merchants are well-positioned to offset the impact of PSD2 on fraud and fraud prevention, they should do everything they can to continue to provide excellent customer experience, while also keeping transactions secure and fraud levels as low as possible

Added Weitz: “Given the clear regulatory incentives under PSD2, a merchant’s fraud rate (high or low) suddenly becomes a crucial commercial factor.”

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