Strong Customer Authentication, a Requirement to Combat Payments Fraud, Might Lead to Many Customers Abandoning Purchases at Checkout

Strong Customer Authentication (SCA) testing performed by tech giant Microsoft reveals that consumers are actually leaving their planned purchases at relatively high rates when challenged at the time of checkout.

SCA is a European regulatory requirement that aims to reduce or eliminate fraudulent activities and also make digital payments more secure. Businesses may be required to upgrade their authentication methods so that they meet SCA requirements when accepting online payments.

‎SCA is expected to be enforced toward the end 2020. The SCA rule requires a two-step verification process for all digital or e-commerce purchases of more than €30, which means that consumers will have to maintain a password, be able to use fingerprint or face ID verification, and/or do some type of phone verification.

Microsoft has reportedly been testing out the SCA system for about a year now. The company has been sending a small, random percentage of customer transactions for authentication via EMV 3D-Secure, which is a messaging protocol that aims to support “frictionless” consumer authentication and allows users to authenticate themselves with their card issuer when making card-not-present (CNP) digital commerce purchases.

Dean Jordaan, director of e-commerce and payments, Microsoft, states that challenge success rates are “low to very low,” which means that merchants may potentially lose out on many sales, as consumers will avoid making certain purchases because it may be too much of a hassle.

When challenged consumers begin to leave at the time of checkout, it appears to “suggest [that] customers are confused, don’t like the authentication method, and/or encounter poor implementations of SCA,” Jordaan notes.

In cases where a challenge is successful, and the customer does end up completing the transaction, then they might still have to wait a fairly long time, especially when making in-app purchases.

While the digital commerce sector may request that SCA rules are reevaluated, especially due to COVID-19 related challenges, the European Commission recently stated that it won’t be following the UK’s decisions or plans, and will instead extend the SCA deadline from December 31, 2020.

It’s estimated that merchants might end up losing as much as €90 billion in sales next year, according to  CMPSI, a payments consultancy company.

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