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Online retailers warned of lost sales as SCA comes into effect

Online retailers warned of lost sales as SCA comes into effect

Online retailers are being warned to be prepared for the introduction of Strong Customer Authentication (SCA), the biggest change to payments since Chip & Pin rolled out 16 years ago.

Initially scheduled for introduction on 14 September 2019, the rules - which demand a two-step verification process for all online purchases over €30 - come into effect today.

The FCA promoted early enforcement by issuers throughout February, which resulted in as much as 75% of payment traffic receiving a soft decline and being sent to 3DS (3d-Secure) for further authentication checks.

Barclaycard Payments, which processes £1 in every £3 spent on credit and debit cards in the UK, shows that merchants risked losing out on £102m worth of sales in February.

According to Barclays data, 43,000 transactions a day, worth £3.64m were declined at the point of sale in February.

The data shows, that last month, one percent of shoppers noticed an increase in their online payments being declined. Additionally, 37% headed to another retailer to complete their purchase, while the same proportion said they’re unlikely to shop with a merchant in future if their payment gets rejected without explanation.

According to Adyen just 44% of businesses are prepared for the new rules.

Rob Cameron, CEO of Barclaycard Payments, comments: “Merchants who aren’t yet ready should start to prioritise becoming compliant to avoid losing out on sales. Our data has already shown the impact of not being prepared, and this will only get worse if steps are not taken now. The message to retailers is clear; if you don’t make buying online quick and easy for your customers they will simply go elsewhere.”

Nick Raper, director of Nuapay, believes that a shift to open banking payments will provide a way out of the mire for consumers and online merchants: "The industry needs to stop talking about security and look to options already available such as open banking payments to ensure that the consumer impact is minimised and merchants are given the tools they need to remain compliant.”

Comments: (3)

Andrew Smith
Andrew Smith - RTGS & ClearBank - London 14 March, 2022, 17:231 like 1 like

This drives me nuts. SCA is for sure needed, it will protect many of us from typical fraud scams. However, the impact on the customer experience will also ensure many of us will drop out of our shopping carts and ultimatly, that results in loss of sales and frustrating experiences for consumers.

If only regulators and the financial services industry would look to more innovative solutions, yes you may struggle to understand them at first, but there are much better models and solutions for delivering security online. It's time we really looked at these models, most of which are possible because of digital identity. 

The current crop of security solutions will soon prove to be the diesel car or the mini-disc approach....

Bill Trueman
Bill Trueman - Riskskill.com - London 15 March, 2022, 11:121 like 1 like

There are two factors that SHOULD annoy us all:

- Whilst it is tough on the average (small retailer), the retailer trade bodies puched hard for this and drove the changes to EU law to get the current solutions to replace the inadequate ones associated with 3DS.

- Associated with this, the law is over 5 years old now for this, the project has been going for this time, and we have been granted delays by the regulators for about three years to allow this to be properly implemented. It is no good for these banks/acquirer to no winge-on about it on behalf of their merchant communities: when it has always been their responsibiity to introduce the solutions and services to their merchants and to help their merchants through the challenges.

There are of course a myriad of other issues, not least that the merchants that ***may** well be affected most are those that have high levels of fraud, high rates of chargebacks and poor processes.

Accordingly, the responsible, forward thinking and proactive merchants with adept management and systems will win the business that is lost by others. And this is the way it should be!

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 15 March, 2022, 12:38Be the first to give this comment the thumbs up 0 likes

When FCA extended its deadline by six months last May, I wondered if SCA would become one more initiative to use the pandemic as fall guy to scale back or shut down.