Strong Customer Authentication (SCA) has created the shift in retail payments since contactless technology, says Vince Graziani, CEO, IDEX Biometrics, having finally been enacted in full across Europe as of March 14th.
Introduced as part of the Second Payment Services Directive (PSD2), SCA is a staple requirement for all retailers and payment service providers, requiring stronger identification from customers at the point of payment both online and in person. The goal is to improve payment security and reduce card fraud across Europe.
This is a vital concern. According to the European Central Bank, card fraud is still on the rise. Despite the use of chip and PIN authentication, card fraud committed at POS terminals has increased by 2.2% in recent years. Overall 3.6% in every €100 spent in Europe using credit and debit cards is being lost to fraud, increasing pressure on payment providers to deliver more secure transactions to consumers.
SCA aims to counter these rising levels of fraud by demanding a two-step verification process for purchases over the local contactless limit. In essence, it is advanced authentication required from a consumer at the point of payment.
Customers have to verify their identity during a transaction using two of the following methods of authentication: something they know (a PIN or password), something they have (such as a smartphone or bank card), and something they are (such as biometric data).
This presents a significant logistical challenge for retailers and those who process payments. Maintaining the digital infrastructure to offer a one-time passcode SMS for fraud prevention, for example, while keeping an optimised customer experience is not easy. As a result, many businesses still haven’t made the full update.
Why aren’t retailers ready for the transition?
The cause for concern around the success of SCA stems from the journey it has been on to reach this point. The previous implementation deadline was in 2021, but the UK’s Financial Conduct Authority pushed the milestone back a further year because of fears of lack of preparation. This was the third time the deadline had been extended to give retailers the time to address a number of issues including compliance, logistical challenges and digital infrastructure.
Despite that, research suggests just 44% of businesses are currently ready for the SCA regulation. Without an SCA process, payments will simply be declined, which can send consumers to a competitor. Likewise, an inconvenient or clunky transaction experience can put consumers off a brand who hasn’t fully thought through their SCA implementation.
That has the potential to seriously impact a smooth customer experience and business for many retailers across Europe. With the regulation now final, how can retailers, card providers and consumers adapt, while still providing the fast, seamless shopping experience their customers demand?
Making the most of who your customers are
For retailers and payment providers, biometric payment cards offer a seamless and cost-effective way to adhere to the impending SCA transition.
These cards have inbuilt fingerprint sensors to verify ownership providing strong customer authentication via the third SCA factor something you are. Biometric fingerprint authorisation links the person to the payment card. It is the key link in the chain of trust, making payment transactions SCA compliant, as well as eliminating the incentive for theft or misuse of payment cards.
The smart cards also come with the added benefit of convenience. Validating a contactless payment with a fingerprint speeds up the transaction process and removes the requirement of PINs, payment limits or the use of a smartphone.
SCA has caused an extra layer of complexity for businesses who have endured drastic change and pressure in recent times. To support those retailers, payment providers and card issuers must now embrace biometric payment cards, such as those recently launched by BNP Paribas and Swedish bank challenger Rocker, as standard. With a biometric payment card, retailers won’t have to provide any additional infrastructure, or change their payment system to be SCA compliant. They simply need to accept contactless payments.
A secure smart card with a payment experience
Biometric fingerprint payment cards offer payment providers an opportunity to embrace innovation that will help them meet secure forms of authentication with confidence and ease. By investing in their usage now, payment providers also likely to be saving themselves future investments, with the FCA already stating that they see authentication through biometrics as the long-term future of secure payments.
Of course, security is of paramount significance but it is convenience that drives a consumer’s day-to-day decisions. Strengthening security, convenience and peace of mind in one smart payment is the best card to play for payment providers and retailers as they look to keep up with SCA regulation.
The author is Vince Graziani, CEO, IDEX Biometrics.
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