Blog article
See all stories »

Safety is the new experience - but so is PSD2 and SCA

Retailers have been wrestling for months with the effects of COVID-19 — scattered workforces required to work from home, closed brick-and-mortar stores, dramatic spikes in online sales. And now, as they begin to reopen their physical stores, they are faced with another major disruption — the need to be ready for full enforcement of PSD2 and its strong customer authentication requirements for online sales.

Many retailers have circled early autumn as the latest date they want to have their SCA solutions in place. Although the European Banking Authority has set December 31 as the deadline for merchants and their banks to have SCA solutions up and running, retailers do not want to be revamping their payment systems in the midst of what they hope will be a busy holiday rush. 

And while retailers in the UK won’t see strict enforcement until September 2021, if they want to sell cross-border in Europe, the earlier deadline will apply to those sales.

In short, retailers in Europe are powering through one of their most challenging times in history. And yet, for reasons we’ll get to in a minute, this is also the moment for retailers to step up and build a bigger customer base by creating safe in-store environments and seamless SCA experiences online.

First, let’s review how we got  here.

The current retail landscape

Retail sales figures were in drastic decline as a consequence of the pandemic lockdown measures. In April sales fell by a record 18.1%, following a strong monthly fall of 5.2% in March 2020, according to the Office for National Statistics (ONS). In May, ONS points out that sales volumes partly rebounded, with an increase of 12%, when compared with the record falls experienced in the previous month.

The lockdown also contributed to a stark increase in the number of retailers that have gone bust and who filed for administration. JD Sports’ Go Outdoors, Oasis, Warehouse, Laura Ashley and Cath Kidston include famous brands that now face existential crises.

It’s not just retailers or businesses that are feeling financial strain, of course. Months of lockdown and job losses are weighing on many consumers, too. If consumers rein in their spending or avoid shopping in stores for fear of getting sick, retailers would find themselves with another worry on their hands.

The one bright spot in all this has been ecommerce. Online sales saw an historic surge in the second quarter of the year, given that many physical stores were closed down. Even as stores re-open, ecommerce continues to see big sales gains.

In May, ecommerce sales were trending nearly 100% above where they were in the pre-pandemic period, according to Signifyd’s Ecommerce Pulse data. The increases have cooled somewhat, but online sales are still hovering at 32% above where they were at the beginning of March.

Some retail experts suggest that the lockdown has accelerated the ongoing shift from in-store to online sales, Indeed, ONS revealed that the proportion spent online soared to record high in May, reaching 33.4% of all sales, up from 30.8%  in April.

Still, with conditions changing so quickly and variably, depending on the sales channel and retail vertical, it’s understandable that retail leaders might find themselves at a loss when it comes to strategy.

Here’s a thought: Go for it. Despite the upheaval, this is a moment in retail when merchants can capture new customers while reassuring loyal shoppers who have been on the sidelines in the pandemic. The strategy can be executed on two fronts: in store and online.

Safety is the new experience

It’s hard to imagine an in-store environment in the COVID-19 era that would live up to the fun, almost recreational, experience that shoppers once enjoyed. Instead, consider that customers will be looking for reassurance. They will want safe-distancing markers on the floor. They will want to see frequent cleaning and contactless payment options. They’ll expect plexiglass partitions at the till and plenty of hand sanitizer. In short: Safety is the new experience.

Ecommerce must continue to be a crucial part of this wider shopping experience. It needs to demonstrate safety, too. It is evident that consumers have embraced the channel. But, it needs to be secure and work seamlessly, so that shoppers have a choice: They can buy online when they want to and they can visit a store for those things they’d truly like to touch and see.

All of which brings us back to SCA. Juniper Research predicts  that ecommerce merchant losses to online payment fraud will exceed $25 billion in 2024, from just $17 billion in 2020. The new SCA requirements, of course, were instituted to better protect consumers (and retailers) from fraud.

Even so, since the requirement was first proposed, retailers worried that the extra security would bring extra friction. But that doesn’t have to be the case. A recent report by Forrester Research makes it abundantly clear that doing PSD2 right can actually be a big customer experience win.

“However, if implemented well, change need not be disruptive and aspects of the regulation can unlock new opportunity, innovation, and potential cost savings for retailers and their customers,” the report says.

The report details how the technology that implements the new rules can provide ways for merchants to migrate customers to payment options that save the retailer money. And it points out that PSD2 allows for a new kind of payment entity, called a payment initiation service provider (PISP). A PISP is allowed, with a consumer’s permission, to use a bank’s infrastructure to request payments directly from a shopper’s bank account. The new regulation allows retailers to become PISPs, which gives them far more control over their payment stack and the payment experience they provide.

Meantime, others have noted that the delays in enforcing SCA have given innovators time to come up with new machine-learning solutions that can protect merchants from fraud today, while preparing them to adhere to SCA as soon as the requirement kicks in.

“We need to recognise that and have a fresh look at the fraud tools that we already have and new analytics and prevention tools,” Paul Rodgers, chairman of Vendorcom and a leading expert on SCA regulation, said in a written statement. “There are plenty of solutions providers out there that can make those available.”


As retailers grapple with their future and the twin challenges of providing safe in-store and online experiences, they need to keep deploying SCA at the top of their lists. After months of lockdown and worry about the novel coronavirus, consumers are more than ever looking to retailers to keep them safe — both in the store and online. Those who master the task will come out of the pandemic stronger than they were when it began.


Comments: (0)

Member since




More from member

This post is from a series of posts in the group:

Payments strategies 2015-2020-2030

Payments systems visions, strategies, trends, pilots, forecasting, and planning for the short-, medium-, and far-term.

See all

Now hiring