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Executive Overview: Meeting PSD2 with Passkeys and Biometrics
Strong Customer Authentication (SCA) and dynamic linking are central to PSD2 compliance in banking. As financial institutions adopt modern authentication, understanding how biometrics, passkeys and dynamic linking intersect is vital for secure transaction authorization. Corbado’s solution leverages phishing-resistant passkeys, bank-controlled transaction displays and robust backend validation to ensure compliance with PSD2’s Regulatory Technical Standards (RTS), especially Article 5, which mandates the “what-you-see-is-what-you-sign” principle.
What Is Dynamic Linking and Why Does It Matter?
Dynamic linking requires each authentication to be uniquely bound to the payment’s amount and payee, protecting transactions from manipulation even if a session is compromised. This means that any changes to transaction details will invalidate the authentication, providing end-to-end integrity and confidentiality.
Evolution of Secure Transaction Authorization
Early dynamic linking methods, such as SMS OTPs, have been replaced by more secure options like mobile app push notifications and device-based biometrics. Today, when users approve a transaction, local biometrics (like fingerprint or Face ID) unlock a private key, which is then used to sign a one-time transaction challenge. Combined with a bank-controlled user interface that clearly displays transaction details, this approach achieves both dynamic linking and payer awareness requirements.
Why Passkeys Are PSD2-Compliant
Passkeys combine device-bound possession (private keys stored securely) with user verification (biometrics or PIN), satisfying SCA’s two-factor requirement. They are inherently phishing-resistant, as the private key never leaves the user’s device and are origin-bound to prevent misuse. Two main approaches to dynamic linking with passkeys are used:
- Server-Side Linking: The backend binds the authentication challenge to transaction details, ensuring any change invalidates the authorization.
- Cryptographic Inclusion: The challenge itself contains a hash of the transaction data, making the link cryptographically verifiable.
Ensuring Payer Awareness and Display Integrity
Payer awareness is a PSD2 regulatory requirement: users must see and approve the exact transaction details. Corbado enforces this by using bank-controlled UI elements, overlay detection, device integrity checks and secure, atomic approval steps. This prevents attackers from manipulating the display or transaction data before user approval.
Technical Architecture and Compliance Features
Corbado’s architecture provides:
- Device integrity gating and payee canonicalization
- Immutable audit records for transaction traceability
- End-to-end secure challenge generation and verification
- Compliance with all RTS Article 5 requirements
Residual risks such as phishing, malware or compromised devices are mitigated by built-in phishing resistance, contextual warnings, device attestation and anomaly detection.
Addressing Common PSD2 Compliance Questions
- Two-factor authentication: Passkeys fulfill both possession and inherence factors.
- Replay/manipulation: One-time, transaction-bound codes prevent reuse and tampering.
- Regulatory acceptance: Leading authorities recognize passkeys as compliant when paired with payer awareness and dynamic linking.
Conclusion: Future-Proofing Payment Security
Corbado’s passkey-based authorization is fully PSD2-compliant, improving both security and auditability over legacy methods like OTPs. When combined with a bank-controlled transaction display and transaction-specific challenges, passkeys deliver a user-friendly, technology-neutral and scalable solution for modern banking.
Find out more about dynamic linking, biometrics in banking and how to implement compliant passkey authentication in your systems at Corbado Blog.
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