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European Retailers Are Juggling Brexit, SCA, VAT and an Alphabet Soup of Worry


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It’s no wonder that Britain’s Sky News has launched a news channel that promises to be Brexit-free.

It seems the back-and-forth over Brexit has been going on forever, mostly because, well, it has. UK Citizens voted in 2016 to leave the European Union and that has yet to happen — and it’s still not certain when it will or if it will.

Not only has Brexit not happened, it has almost happened and then not happened, then almost happened again and then not happened again and been about to happen only to be delayed. 

And while the back-and-forth has contributed to a sort of Brexit fatigue among some, the back-and-forth has been more than simply tiring for UK businesses, including retailers, who have struggled to make long-term plans and who have seen sales suffer with the uncertainty.

Key points

  • European merchants face dramatic changes tied to Brexit, PSD2 and more.
  • UK retail sales and planning have been hammered by Brexit uncertainty
  • The EBA has offered one bit of certainty: Retailers must have SCA fully up and running by Dec. 31, 2020.

And Brexit is only part of the story for European retailers who are also grappling with new strong customer authentication (SCA) requirements ushered in with PSD2 and who must consider coming changes to the VAT tax, while absorbing new ways of doing business under revised rules for cross-border parcel delivery. 

All this just a little more than a year after having to adjust to new data privacy regulations wrapped up in GDPR rules

You’d be forgiven if you feel you have to take a nap after just reading about the upheaval. For retailers, of course, this is no time to rest.

Brexit, SCA and other big changes keep European merchants scrambling

The stops and starts on Brexit would be comical if the matter weren’t so serious and the matter is very serious indeed. The British Retail Consortium, a trade group of retailers including ecommerce businesses, said earlier this month that September 2019 was the worst-performing September since it started keeping records in the mid-1990s, according to The Guardian. 

“With four months of negative sales growth since March, the ongoing political gridlock surrounding Brexit is harming both consumers and retailers,” BRC Chief Executive Helen Dickenson told the Guardian. “Clarity is needed over our future trading relationship with our closest neighbors, and it is vitally important that Britain does not leave the EU without a deal.”

The reference is to the notion of the UK leaving the European Union without a framework for trade and other matters, which remains a possibility. As it is, the consortium reported that retail sales, including online, dropped 1.3% in September compared to a year earlier and that sales in the past year were flat.

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If you’re a retailer in Europe, let’s just say you’ve got a lot on your plate. In fact, you need a bigger plate — Brexit, SCA, VAT, new delivery rules. We can help you take SCA off your plate. Check out our deep dive into Seamless SCA, the first 3-D Secure version 2.2 solution to receive all of the merchant domain certifications from EMVCo. To learn more about 3DS 2.2 and Signifyd Seamless SCA, register now to join Signifyd’s J. Bennett and Ed Whitehead and mSignia’s George Tuvell for this enlightening webinar.

But the flurry of negotiation and votes on Brexit has done little to provide guidance to those in the retail industry.

“It’s unfortunate that there is more uncertainty,” Richard Kennedy, chief executive of Devenish Nutrition, a Northern Ireland animal-specialty-food maker, told the Wall Street Journal after Parliament made no progress over the weekend. 

Earlier this year, we talked to Daniel Lucht, global research director at London-based ResearchFarm, about some of the steps retailers might take to prepare for Brexit, and in particular a no-deal Brexit. While Lucht was not terribly optimistic, he did share a few thoughts in the brief video interview below.

As the Brexit dance plays out, retailers in the UK and across Europe are also working to comply with new SCA requirements that change the process by which online payments are made in the European Economic Area. 

At its heart, the new regulation requires that merchants verify that customers are who they say they are through two of three factors: 

  • Something they know, or knowledge, meaning a password created before the transaction, for instance.
  • Something they have, or possession, meaning a mobile device, for instance.
  • Something they are, or inherence, meaning a fingerprint scan or keystroke behavior, for instance.

Retailers must meet PSD2’s strong customer authentication rules by 2021

The new rules came with dire predictions about ways in which the rules would hurt sales and with some confusion about just when retailers had to be fully prepared to abide by the new regulations, which are part of the PSD2 rules that became effective on Sept. 14.

The European Banking Authority cleared up much of the confusion in an opinion this month, declaring that retailers will need to be in full compliance with the new SCA regulations by Dec. 31, 2020, which amounted to a good-news-bad-news situation for retailers. 

The good news, of course, was the clarity. The bad news was that the deadline effectively gives retailers about a year to comply if they want their proper SCA up and running for the 2020 holiday shopping season. 

The further good news is that technology provides a solution for retailers who want to comply with the new regulation without introducing friction into the buying process. Signifyd, for instance, recently introduced Seamless SCA™. It’s the first 3-D Secure version 2.2 solution to receive all of the merchant domain certifications from EMVCo, the payments industry consortium that issues specifications related to secure payment transactions.

In short, Signifyd relies on its machine-learning heritage to conduct dynamic fraud analysis of orders, as it has been offering along with a financial guarantee since 2014. It then passes the SCA decision down the 3D Secure rails to eliminate delays in approvals and maximize authorization rates.

It also is a way for merchants wrestling with Brexit, tax changes and delivery regulations to cross one worry off their list and devote more time to retail, which is no doubt what they really want to do.

Well that, and maybe check out that Brexit-free Sky News channel.

Photo by iStock

Mike Cassidy

Mike is lead storyteller at Signifyd. A former journalist and a retail geek, he covers ecommerce and the way technology is transforming digital commerce. Contact him at mike.cassidy@signifyd.com; follow him on Twitter at @mikecassidy.