How Airlines Can Meet PSD2 and SCA Requirements Without Sacrificing Conversion

Compliance vs. Conversion — A False Trade-Off?

For airlines operating within the EU, navigating payment regulations has become more complex than ever. PSD2 and its Strong Customer Authentication (SCA) requirements were introduced to strengthen security and reduce fraud in online transactions. But while these rules protect consumers, they can also introduce friction—particularly in the fast-paced, high-stakes world of airline bookings.

At first glance, compliance and conversion seem to be in conflict. Adding more steps to the payment flow may help meet regulatory demands, but it also increases the risk of drop-offs, especially on mobile or during last-minute purchases. Yet, this trade-off doesn’t have to be inevitable.

The following analysis outlines how airlines can meet PSD2 and SCA requirements without sacrificing booking performance. From dynamic exemptions to smarter authentication flows, we’ll look at proven strategies that help airlines stay compliant while delivering the seamless experience customers expect.

PSD2, or the Revised Payment Services Directive, was introduced to increase security, competition, and innovation in digital payments across the EU. One of its core requirements is Strong Customer Authentication (SCA), which mandates that most electronic transactions be verified using at least two of the following:

• Something the customer knows (like a password)
• Something they have (like a phone or token)
• Something they are (like a fingerprint or face scan)

For airlines, this impacts nearly every online card transaction—especially in card-not-present scenarios, which are the norm for flight bookings. It’s even more complicated when dealing with cross-border payments, mobile bookings, and multiple currencies, where authentication steps can vary by region and issuer.

However, not every transaction requires SCA. Low-risk payments, recurring charges, and corporate or loyalty program bookings may qualify for exemptions—if properly flagged and processed. These exceptions are crucial for airlines to maintain booking flow and minimize unnecessary friction, particularly for frequent flyers or business travelers.

The key challenge is not whether airlines can comply with PSD2, but how they can do it without disrupting the customer experience. Understanding the rules is step one; applying them strategically is where the opportunity lies.

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Why SCA Can Hurt Conversion — and How to Avoid It

In the quest to balance rigorous compliance with a smooth user experience, one of the most significant challenges airlines face with Strong Customer Authentication (SCA) is the potential for conversion pain points. The additional layers of security, while crucial for safeguarding transactions, can sometimes act as a roadblock for customers eager to finalize their travel plans.

Friction from additional authentication steps: Imagine a passenger who has just found a last-minute flight deal on their mobile device. They're ready to book but face a cascade of authentication steps to verify their identity. While these steps are meant to protect both user and airline from fraud, the added friction might lead to frustration, resulting in abandoned carts and lost sales.

Drop-offs during 3D Secure challenges: During the final stages of mobile bookings or when dealing with international transactions, 3D Secure challenges often act as unexpected hurdles. A global traveler might be in a different time zone, scrambling to find a stable internet connection to receive prompts in time. The complexity and inconvenience can easily turn enthusiasm into reluctance, leading to a drop-off just before the finish line.

Confusion from OTPs or biometric prompts: One-time passwords (OTPs) and biometric prompts can safeguard transactions, but they can also bewilder customers, especially those less familiar with digital authentication methods. A passenger tired from a long layover may find it difficult to switch between mobile apps to retrieve an OTP or might struggle with biometric verifications under hastily arranged lighting conditions.

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These scenarios highlight the delicate balance airlines must maintain to streamline the payment process while upholding the stringent requirements of SCA. By understanding where friction occurs, airlines can develop targeted solutions—like user-friendly authentication systems and clear guidance throughout the booking journey—to help reduce drop-offs and enhance conversion rates without compromising on security.

Smart Approaches Airlines Can Use to Stay Compliant Without Losing Bookings

While PSD2 and SCA introduce new complexities, airlines don’t have to choose between compliance and conversion. With the right strategy, it’s possible to meet regulatory requirements while keeping the booking process fast and frictionless.Here are some of the most effective approaches:

1. Dynamic SCA Exemption Management

Airlines can intelligently identify transactions that qualify for exemptions—such as low-value payments, trusted customer profiles, or recurring bookings—and bypass unnecessary authentication. This is especially valuable for frequent flyers or corporate clients, where added friction can damage loyalty.

2. Upgrade to 3DS 2.2 or Later

The latest version of 3D Secure supports better user experiences across devices. It enables frictionless flows where authentication happens silently in the background and provides smoother mobile and app-based journeys—critical for on-the-go travelers.

3. Risk-Based Authentication

By analyzing transactions in real time, airlines can flag those that are low risk and approve them without additional customer input. This allows you to apply SCA only where it’s truly needed, reducing friction without compromising security.

4. Intelligent Routing via PSPs

Working with payment service providers that support fallback authentication paths ensures that even if the first attempt fails, the transaction can be retried through a secondary channel. This helps avoid failed bookings due to technical errors or temporary authentication issues.

5. Pre-Screening with AI

AI-driven fraud prevention tools can assess transactions before they reach the checkout stage. If a transaction is likely to qualify for an exemption, it can be routed accordingly—reducing authentication prompts and speeding up the payment flow.

Together, these strategies help airlines build a smarter authentication process—one that meets regulatory obligations while preserving the fluid, customer-friendly experience today’s travelers expect.

Infrastructure That Enables Flexibility and Control

To deliver both regulatory compliance and a seamless customer experience, airlines need the right infrastructure in place. It’s not just about adopting new tactics—it’s about having the flexibility to apply them precisely, at scale, and in real time.Here’s how modern payment infrastructure enables that control:

Centralized Exemption Logic

A centralized platform allows airlines to apply SCA exemptions intelligently, based on factors like transaction value, customer history, or device risk. This means exemptions aren’t handled manually or inconsistently—they’re triggered automatically and accurately, reducing unnecessary friction for eligible passengers.

Real-Time Visibility and Control

Airlines need full transparency into how transactions are being authenticated. Real-time dashboards and monitoring tools can reveal where drop-offs are happening, how exemptions are being applied, and whether 3DS flows are performing as expected. This insight allows payment teams to identify issues quickly and adapt strategies on the fly.

Brand-Aligned Authentication Experiences

API-first platforms allow airlines to customize how authentication prompts appear, ensuring consistency with the overall booking journey. Instead of jarring redirects or unfamiliar screens, passengers see a trusted, brand-aligned experience—building confidence and reducing hesitation at the final step.

Together, these capabilities help airlines stay compliant without giving up control. More importantly, they allow for faster response times, better user experiences, and a stronger connection between technical performance and business outcomes.

Real-World Gains: How Airlines Are Reducing Friction While Staying Compliant

Airlines that take a proactive approach to SCA aren’t just avoiding regulatory risk—they’re seeing measurable improvements in booking performance.

For example, many carriers that have adopted 3DS 2.2 or later have reported double-digit reductions in checkout abandonment. With smoother mobile authentication flows and support for biometric methods, customers are more likely to complete transactions—especially on short-notice or mobile bookings.

One European airline implemented dynamic exemptions for returning customers and low-risk corporate bookings. As a result, they saw a noticeable increase in approval rates and a reduction in 3DS challenge rates—without any rise in fraud incidents.

Another carrier deployed smart routing logic with their PSP, allowing transactions that failed the first SCA attempt to be retried through a secondary path. This small adjustment helped recover bookings that would have otherwise been lost due to avoidable authentication failures.

These examples show that with the right technology and processes, compliance can actually become a lever for growth—not a barrier. Airlines that optimize their SCA strategy reduce drop-offs, improve approval rates, and deliver a better experience for passengers across every channel.

Final Takeaway: Turn Compliance Into a Conversion Advantage

As airlines continue to soar above PSD2 regulations and navigate the skies of compliance, there's a golden opportunity hidden within the challenge. Rather than viewing Strong Customer Authentication (SCA) as merely an obligatory hurdle, it can be transformed into an asset—an opportunity to modernize and enhance the checkout experience, positioning compliance as a conversion advantage

Decision-makers are encouraged to assess their current Payment Service Providers (PSPs) for their ability to support dynamic authentication and manage exemptions adeptly. By harnessing dynamic authentication capabilities, airlines can create a more personalized and streamlined booking journey that accommodates diverse passenger needs and behaviors.

Imagine implementing sophisticated algorithms that deftly distinguish between high-risk and low-risk transactions, allowing the latter to glide seamlessly through the checkout process without unnecessary additional steps. This not only preserves conversion rates but has the potential to bolster customer satisfaction as well.

Moreover, by prioritizing flexibility and innovation, airlines can turn compliance requirements into stepping stones for a superior customer experience. A proactive stance towards leveraging modern authentication technologies is key, and by doing so, airlines not only meet regulatory demands but can also transform these challenges into a competitive edge