A look ahead to strong customer authentication

Last year, the payments industry faced the imminent roll-out of Strong Customer Authentication (SCA) regulation. Placing an increased focus on fraud prevention and customer protection, SCA attempts to mitigate increased security threats and cybercrime by requiring all EEA transactions to go through a two-factor authentication process, unless they qualify for an exemption.

It’s vital that we use the year ahead to invest in long-term consumer testing.

Retailers were up against the clock to figure out how they could become compliant without sacrificing their ability to provide a great customer experience. No small task. In recognition of this huge undertaking, the Financial Conduct Authority (FCA) decided in August 2019 to grant an 18-month extension, giving UK businesses more opportunity to get ready.

This extra time should not be squandered. It’s essential that steps are taken now if the new legislative deadline is to be met without any adverse effects – to merchants or their customers.

The situation so far

Most issuers, acquirers and merchants have already started preparing themselves, upping the authentication levels required for many online purchases. In encouraging news for retailers, we haven’t seen any evidence of a direct impact on the volume of rejected transactions or abandoned shopping baskets. However, it’s important that developments continue to be closely monitored.

As the extension period ticks on, we’ll be seeing more merchants and acquirers testing and trialling two-factor authentication techniques, painting a better picture of what the impact of SCA will be on the payments industry.

Making the most of 2020

The next several months will be crucial for businesses looking to ensure they are fully prepared to not only meet the new requirements, but to do so in a way that doesn’t compromise on their customer experience. Those that don’t will see an increase in failed purchases, declines from issuers and a potential rise in basket abandonment.

As two-factor authentication comes into force, retailers are understandably concerned that this could mean fragmented payment journeys for customers, coupled with confusion regarding how providers use different authentication methods. The challenge the industry faces now is to clarify the various methods available and converge on those that are most convenient for the customer.

While this sounds daunting, it need not be. A trusted payments provider can offer solutions that help merchants identify which transactions are exempt from the rules and help navigate ways to simplify authenticating those that are not. We recently partnered with fraud protection software provider Kount so that we can also provide merchants with tools to better screen their transactions and manage fraud exposure to their business.

Getting customer experience right

If merchants are to meet the new deadline without compromising on a frictionless experience for their customers, it will be essential to draw on the expertise of providers and take the time to test the compliance measures that best marry security with convenience.

It’s vital that we use the year ahead to invest in long-term consumer testing and feedback to ensure that future customer payment journeys are as convenient as possible.

By Paul Adams, director of payment acceptance at Barclaycard