As the ecommerce market grows, so does the threat of fraud and abuse. The risk of fraud has forced European markets to react with the Payment Services Directive 2 (PSD2) regulation, designed to offer safer and more innovative payment services in the UK and the EU.
Part of this directive includes Strong Customer Authentication (SCA), a process that verifies the identity of consumers as it attempts to block fraudsters from abusing businesses or harming customers.
Here, we explore what PSD2 and SCA change for your business, how they affect your checkout process and what you can do to boost customer experiences and revenue with intelligent and compliant fraud protection for ecommerce.
What does SCA require?
It does what it says on the tin: Strong Customer Authentication verifies the identity of a customer and it does so with a firm hand. SCA requires consumers to prove two aspects of their identity from three choices.
Customers need to prove at least two of these ideas:
- Something they know, such as a pin code or password.
- Something they own, like their mobile phone.
- Something they are – think of fingerprint scans or facial recognition.
There are exemptions to SCA, where the risk of fraud is reduced. If a transaction is under €50, it would qualify for a low-value exemption. However, five consecutive low-value purchases – or if those total payments exceed €100 – will trigger SCA being required. Recurring payments, such as subscriptions, are also excluded, but only after an initial SCA.
There are more ways that merchants and customers could be exempt from an SCA, including using an intelligent fraud protection platform that approves customers for low-risk exemptions, but more on that in a bit.
Ultimately, by proving customer identities, a business can have a level of assurance that their customers are legitimate. It adds a layer of security. However, there are still holes in SCA and authenticating platforms such as 3D Secure that means fraudsters can sneak past basic defences and the customer experience is damaged.
Friction at the checkout
While SCA should help prevent fraud and create a more secure checkout for consumers and merchants, it could be doing more damage than good. This is because it extends the checkout process, creates more touchpoints and creates barriers to completing payments. For customers, it can count as a negative experience and for merchants, it can hit them where it hurts – profits.
SCA may require customers to enter more personal details than they are previously used to or be forced to log in to an account or social media to verify their identity. However, it’s clear that these steps are a nuisance for consumers.
Signifyd’s consumer survey proves as much. When asked for reasons why they wouldn’t shop with a specific online retailer again, 30.6% of consumers cited multiple steps to verify their identity. Meanwhile, 28.5% said requirements to create or log in to a retailer account was a reason to stop shopping.
In the end, payments consultancy firm CMSPI predicts that €85 billion in sales will be lost in 2021 because of transactions subject to SCA that retailers are not prepared to handle seamlessly.
“Then what is the solution to being SCA compliant while creating a frictionless checkout experience?” you ask. Well, the answer is simple – a PSD2 and SCA-ready fraud protection solution for your ecommerce store.
Fraud prevention solutions
You can make your business compliant with PDS2 regulation and improve your security, reduce fraud and abuse and make the customer experience one that will encourage returning customers.
Remember how there are qualifying exemptions to SCA? Well, fraud protection platforms such as Signifyd can help identify customers through intelligent machine learning, assessing their risk level. If they are identified as a low risk, then they may be exempt from SCA, meaning that the checkout process is easier for all.
How does it work? Big data is used to build a profile of customers, utilising their purchasing history. This assesses the likelihood of abuse or fraud and points out any suspicious activity.
It also avoids any awkward interactions. If you incorrectly block a legitimate customer because you believe it may be a fraudulent purchase, you’ve created a negative experience. Signifyd’s fraud protection platform minimises this risk and offers 100% protection against fraud and abuse. So even as fraud changes as SCA becomes more common, fraud and chargebacks can be reduced. This not only creates a good customer experience but can give you a significant boost to your revenue.
Using a fraud protection platform can be an integral part of your PSD2 and SCA strategy. By seeking exemptions and eliminating risk, fraud and abuse, you can create positive customer experiences through seamless checkouts and take your ecommerce store to the next level.