What Opportunities Does SCA Enforcement Create for Merchants?
Strong Customer Authentication (SCA) is changing checkout processes, aiming to reduce fraud. However, as SCA becomes common amongst online retailers in the UK and the EU, it is unsurprising to learn that the pressure of fraud will also change. Where SCA payments will be able to tackle some types of fraud, other aspects of abuse will dominate the world of ecommerce. But as you construct an anti-fraud strategy in your business, we should continue to seek out opportunities, even with the SCA PSD2 solutions. By addressing the Payment Services Directive (PSD2 regulation) head-on, we can find opportunities to improve customer and merchant experiences, security, and revenue. Through an intelligent online fraud prevention solutions, you can get an edge on your competition in more ways than one.
SCA: the great market disruptor
Faster checkouts and more secure transactions are just some of the expectations of customers as technology continues to innovate. But this natural flow of innovation and advancement has been disrupted by the introduction of SCA PSD2 solutions. Customers are spending longer at the checkout stage than ever before due to two-factor identification. This is leading to antiquated customer experiences and higher rates of cart abandonment. It’s a big problem; 26 per cent of consumers say that long checkout processes are a reason to abandon their online shopping cart, according to the Baymard Institute.
But where your competitors’ trip on their PSD2 strong customer authentication regulation, you can use this great market disruptor to your advantage. Improving the checkout process can be achieved through your online fraud prevention solutions, enhancing the customer experience, reducing cart abandonment, and maintaining good PSD2 compliance.
Accessibility and choice
By diversifying payment options and accessibility to your online shop, consumers will find it easier to buy from your business. Let’s think about digital wallets on mobile phones. Did you know that 67 per cent of UK shoppers have bought products online in the past 12 months using their mobile phones? This is important when considering payment SCA and two-factor identification, as mobile devices can offer convenience for consumers that desktop computers do not.
SCA payment requires consumers to prove two forms of their identity from something they know, something they own, or something they are. This can be passwords, owning a phone, or biometrics such as fingerprints. By using a mobile phone with a digital wallet, consumers have already proved that they own the phone, and speedy biometric such as facial recognition or fingerprint scanning means that two factors of identification are matched. Ultimately, by offering digital wallets on a mobile version of your website, you’re making it easier for consumers to buy from you and prove that they are not fraudsters.
Assessing low-risk transactions that qualify for SCA payment exemption is another way to optimise the checkout experience. The checkout process is invariably quicker when the need for SCA payment is eliminated. The use of a commerce protection platform, such as Signifyd, means that consumers can be assessed in real time based on their historical record of purchases, returns, and behaviour. It measures the likelihood of fraud and abuse with every transaction. When consumers are deemed to be low risk, the need for SCA is removed, and both the merchant and the consumer is protected. By enabling this level of intelligent protection and ease of use on your ecommerce site, a merchant would be recognised as a leader in the ecommerce market, ensuring that security is at the heart of every purchase.
Easier checkout processes lead to returning customers and a revenue boost, and using payment fraud protection to limit the friction of SCA is vital.
What’s the future of SCA?
The effect of SCA compliance and PSD2 is clear, disrupting the business and revenue of ill-prepared merchants. But compliance with this regulation alone will not protect a business from further innovation and regulation. Preparing for the future is as important as addressing risks to your business today, and that includes understanding the way that fraud and abuse will happen in the future and how they could be eliminated.
Innovations such as artificial intelligence (AI) will play a large role in the future. But as machine learning and artificial intelligence become tools of business to avoid fraud, they too could become the weapons of choice for fraudsters. Biometric identification is an impressive way to secure your checkout, qualifying as one of the three types of authentication in a two-factor identification. But could synthetic ID fraud also be used to create fake profiles that trick even SCA? Can a computer fake a face or fingerprint?
But while AI’s innovation creates opportunities for fraudsters, it also creates opportunities for merchants to protect their business. The number of consumers shopping online continues to grow, and machine learning can help to profile the activities of shoppers, understanding their buying behaviour. Using AI, a customer’s identity can be verified by observing buying and checkout behaviour. Recognising if they are likely to attempt fraud or abuse or if their identity has been hijacked by fraudsters. With Signifyd, 98 per cent of online purchases today have been made by consumers that the back-end monitors have seen before. This means it can flag those who are looking to abuse the system and block them from buying. Fake profiles can also be flagged as a risk.
Proactive measures that tackle abuse from every angle are essential in preparing for fraud and abuse in the future. Compliance with SCA payment alone will not be enough. Only then can you use SCA compliance as an opportunity for your business.
Minimising the Disruption: Merchant's Guide to Simplifying SCA
Signifyd explains everything you need to know about SCA, how will it impact your ecommerce business, and how to prevent future fraud. Download the e-book.