UK not ready for SCA: EPA report

Three quarters of payment issuers said they would be ready for the 14 September Strong Customer Authentication (SCA) deadline from a compliance standpoint, but that they would not be operationally ready.

This is according to a report from the Emerging Payments Association (EPA) which spoke to 13 UK issuers - including three of the four largest with credit, debit and prepaid card portfolios - during the Spring.

It highlighted that issuers will also likely not be able to support the full range of exemptions and 3DS v2.2 identification technology until late 2019 at the earliest.

The report, produced with The Payments Consultancy and supported by Chargebacks911, found that 58 per cent of the issuers surveyed thought that too much friction is being imposed on the payments experience by the second Payment Services Directive (PSD2) regulations.

Once implemented, issuers predicted that in the short term the number of transactions that get declined will increase from today’s three per cent to between 20 and 30 per cent, while the number of authorisation requests is expected to range between a third and half of all online transactions.

Half of UK e-commerce merchants have adopted 3DS v1, a version which is believed by many to meet minimal SCA compliance, as it supports two-factor authentication. On average v1.0 has a 10 to 12 per cent transaction abandonment rate, “which is one the many reasons retailers do not love it”, according to the report. However, 30 per cent of issuers said they are currently planning to decline all v1.0 transactions for fear that the regulator may deem these to be non-compliant.

Tony Craddock, director-general of the EPA, commented: “Instinctively, everyone sensed SCA was going to cause major issues - this research confirms exactly that - but it’s not too late to do something about it, and by following the recommendations in this paper, we can minimise the detrimental impact of SCA on consumers, retailers, PayTech and UK plc.”

In terms of those recommendations for merchants and acquirers, the paper called for 3DS technology to be implemented as a priority, and for merchants to engage in greater dialogue with their acquirers and gateways to identify issues and more effectively tackle fraud. It also suggested that merchants should play a more active role in communicating with customers – thereby helping to minimise disruption.

Mark McMurtrie, director of Payments Consultancy, added: “It is clear that the industry needs more time before active enforcement of SCA, otherwise the negative impact is likely to be extremely high and painful.

“A managed rollout is needed and, if granted, would allow far higher levels of awareness to be achieved, greater solution availability, system integration to be completed and time to resolve the many outstanding issues.”

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