Payment firms raise fears over EU security rules

Payment firms raise fears over EU security rules

A lack of preparedness for the EU's new regulations on authentication could cost Europe's online economy more than €50bn according to a number of payment processors and e-commerce merchants.

A study produced by payment firm Stripe and research firm 451 Research found that only half of the 500 businesses it surveyed expect to be compliant with the EU's Strong Customer Authentication (SCA) rules which are due to come into force in September.

Furthermore, the research suggests that the lack of readiness is disproportionately higher among smaller businesses with 60% of companies with less than 100 employees admitting that they are either unaware of the SCA regulation, unlikely to be compliant before September or unsure of when they will be compliant. In contrast just 4% of firms with more than 5,000 employees are unware of SCA. 

Part of the PSD2 regulation, SCA was brought into bolster security and reduce fraud in online transactions. However, it also requires technology and system changes and cooperation from consumers, many of whom may be unware of the additional steps thyat will be added to the payment process. 

Andeven for those firms aware of SCA, Stripe contends that there is an underestimation of the complexity of SCA compliance tools required and a misunderstanding of how possible exemptions might work.

Exemptions can be applied to recurring payments or small purchases under €30 but, states Stripe, administering the exemptions process could be a costly and complex undertaking for those firms choosing to do it in-house.  

Most worringly for e-commerce vendors and merchants, a failure to properly implement SCA could exacerbate the already low consumer tolerance for so-called 'bad checkouts' and lead to a sharp rise in cart abandonment. 

"SCA is unequivocally the single most disruptive event to impact European digital commerce, and many businesse, especially smaller ones, have yet to fully grasp its extensive impact," said Jordan McKee, analyst at 451 Research. "Our study indicates low levels of preparedness and, most troublingly, a lack of appreciation for how SCA will transform how European consumers will buy online.”

 “SCA will make or break internet businesses. The urgency to get ready for it cannot be overstated,” added Guillaume Princen, head of Continental Europe at Stripe. 




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