Why are online card payments clunkier than ever? And what should businesses do about it?

As the dust settles following the final implementation deadline for SCA (Strong Customer Authentication), there is greater motivation than ever for UK businesses to explore alternative online payment methods, such as account-to-account (A2A) payments and digital wallets.

Strong Customer Authentication introduces a new obstacle at the online checkout when we choose to pay by card, for any transaction over €30. This new hurdle must be navigated in order to authorise a payment and there are indications that online retailers may be losing sales as a direct result of the additional friction imposed on customers.

What is SCA?

SCA (Strong Customer Authentication) is a new requirement for payment service providers in the European Economic Area. It’s designed to improve payment security and reduce financial fraud by enforcing an extra level of verification at the point of payment. Few would argue that additional security measures are important when we consider that credit and debit card fraud in the UK reached £261 million in the first half of 2021 alone (UK Finance Report).

With SCA, customers’ banks will ask them to verify transactions using at least two of three key identifiers: Something the customer knows (e.g. a PIN or password), something they possess (e.g. their mobile device or card reader) and something they are (e.g. their fingerprint, of face ID). For the best user experience, SCA should happen in the customer’s personal banking app, which can utilise biometric security features (something the customer is). A less elegant but common step involves sending a one-time password to the customer’s phone via SMS or email. Find out more about the mechanisms here. 

Card payment providers are quite rightly reminding us that SCA is ‘not going away’ and are assisting businesses with implementation to ensure sales are not adversely affected. This includes correctly flagging transactions that can qualify as exempt from SCA, to reduce friction wherever possible.

However, addressing any issues caused by SCA within the mindset and boundaries of card payments may not be the best approach. Alongside the complexity and confusion from consumers about what SCA is and why they’re being asked to jump through more hoops, sits the rapidly growing world of alternative payment methods, which are often faster, easier and have SCA ’built-in’. These alternative payment types can be implemented alongside existing payment methods, and critically, aren’t subject to card processing fees, which can generate significant savings for businesses.

Open Banking payments are an alternative payment method gaining huge momentum in the UK. Also known as ‘A2A’ (account-to-account), ‘Pay by Bank’ or ‘Easy Bank Transfer’, this new way to pay doesn’t involve entering card details at all. Instead, customers select their bank, and are handed over to their mobile banking app or online banking service to securely authorise their transaction. SCA requirements can be fulfilled more easily, as customers can be handed instantly over to their mobile banking app. Organisations such as HMRC and Cazoo have successfully introduced A2A payments at scale, and many smaller businesses and charities are beginning to take advantage of this technology. Dare I say, the day we no longer have to enter long card numbers, expiry dates, security codes and billing address information in order to buy a pair of trainers isn’t too far away.

Businesses need to be willing to look outside of the card payments box, and alternative payment providers need to make integration a breeze in order for real change to happen.

Ultimately, consumers are demanding better payment experiences, and industries are already beginning to adopt the new technologies that make them possible.

Photo by Pickawood on Unsplash.