Regulatory Brief

Executive Summary

Pay with Passkey represents a transformative approach to digital payments, leveraging FIDO2 passkeys and real-time payment rails to deliver instant, secure, and cost-effective transactions. This brief outlines the regulatory framework, risk considerations, and implementation guidelines for financial institutions.

Key Benefits

•Reduced fraud through biometric authentication
•Instant settlement via real-time payment rails
•Enhanced customer experience with one-tap payments
•Regulatory compliance with PSD2 and similar frameworks

Risk Mitigation

•FIDO2 standards eliminate phishing attacks
•Real-time transaction monitoring
•Cryptographic transaction integrity
•Comprehensive audit trail and compliance reporting

Regulatory Framework

FIDO2 & WebAuthn Standards

Pay with Passkey leverages W3C WebAuthn and FIDO Alliance FIDO2 standards, providing:

• Strong cryptographic authentication without shared secrets
• Protection against phishing, man-in-the-middle, and replay attacks
• Privacy-preserving authentication that doesn't track users
• Industry-standard security protocols accepted by regulators worldwide

Payment Services Regulation

Implementation aligns with key regulatory requirements:

• PSD2 Compliance: Strong Customer Authentication (SCA) requirements
• Open Banking: Secure API access and customer consent frameworks
• Real-time Payments: Instant payment scheme compliance (FedNow, RTP, etc.)
• Data Protection: GDPR/CCPA compliance with minimal data collection

Risk Management

Comprehensive risk controls include:

• Operational Risk: Redundant infrastructure and fail-safe mechanisms
• Credit Risk: Real-time account verification and balance checks
• Fraud Risk: Biometric authentication and behavioral analytics
• Liquidity Risk: Real-time settlement reduces counterparty exposure