What has been the impact of the SCA implementation on UK payments?
By Puja Sharma
To help protect customers from fraud when shopping online, the Financial Conduct Authority (FCA) has introduced SCA. In an era where more and more people are shopping online, these new rules will help to safeguard customers’ money and ensure their safety.
Over 99% of merchants have seen an increase of at least 5% in payment declines (with an average of 37% decline) following the introduction of Strong Customer Authentication; a third (35%) saw payments fraud jump since the start of the pandemic.
To help protect customers from fraud when shopping online, the Financial Conduct Authority (FCA) has introduced SCA. In an era where more and more people are shopping online, these new rules will help to safeguard customers’ money and ensure their safety. Customers will be asked to verify their identity when purchasing items online, for example, through an app on their bank account, or by receiving a one-time passcode via text message or phone call.
In addition to declining non-compliant transactions from 18 January, card issuers will also decline all non-compliant transactions after 14 March. To avoid a cliff edge implementation, retailers should ensure readiness by 18 January 2022. Retailers who do not already support SCA-compliant transactions can receive help from payment providers to upgrade their payment processes.
Research by Nuapay has revealed that U.K. businesses have seen payment decline rates increase by an average of 37% following the enforcement of Strong Customer Authentication (SCA) rules on Mar. 14.
As the cost to business continues to compound, the commissioned data highlights the importance of merchants acting now to review the technology used at checkout. Open banking payments offer a secure, efficient, and cost-effective alternative to traditional cards.
More than a third (35%) of the payment decision-makers surveyed said their businesses’ payment fraud rate had increased versus two years ago at the beginning of the pandemic. Alarmingly, however, when asked if current payments security measures such as PSD2 (the second Payment Services Directive) SCA were fit for purpose, 62% were dissatisfied and felt there was still room for improvement.
Notably, nearly all of the merchants surveyed (99%) have seen an increase in payment decline rate of 5% or more since the new regulation came into force.
“As the research shows, SCA regulations have been far from the silver bullet that regulators might have hoped, creating serious checkout friction and frustration for consumers and lost sales for businesses,” said Brian Hanrahan, CEO, of EML’s Nuapay Business Division.
”Open banking payments offer a clear solution because they’ve been designed since Day 1 to comply with SCA while giving a great mobile-native user experience. They are inherently far more secure than other forms of payment as they don’t require a customer to share their card details with the merchant,” he added.
The new research shows that security and data protection concerns are set to continue. A third (33%) of merchants agreed that payment security would be their biggest challenge over the next 18 months, and a further 29% said data protection would be a primary concern.
Key findings
- Around 29% believe the regulations need to go further to prevent fraud.
- A third (33%) said the regulations hurt the customer experience.
- By comparison, 39% felt the regulations were fully fit for purpose.
- Payment security would be their biggest challenge over the next 18 months.
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