Ecommerce platforms are warning the EU that payment changes could seriously disrupt ecommerce. New SCA (Strong Customer Authentication) will introduce friction in ecommerce checkouts which could see increases in the numbers of abandoned baskets.
Amazon, Worldpay are warning of the potential disruption with research commissioned by Stripe suggesting that in the first year, SCA will result in an estimated €57 billion in purchase volume being abandoned as a result of added friction at checkout.
So what’s happening is that the EU want to clamp down on fraud and SCA will introduce additional authentication into the checkout flow. SCA authentication could be something as simple as a text message one time PIN code but if a consumer is on their computer and has to go fetch their mobile or has poor mobile signal the text message could stop the transaction dead. Other options could include fingerprint confirmation, again only on those devices that support the technology.
With Amazon’s One Click patent having expired in 2017, many ecommerce platforms have been able to introduce checkout in fewer clicks than ever before and that is now at risk.
“SCA is being introduced as part of the second Payment Services Directive (PSD2) with the intention of reducing fraud rates and enhancing the overall security of online payments. It will require online businesses in Europe to capture two mutually independent forms of authentication for most customer-initiated online payments starting on September 14.
While these objectives are laudable, SCA brings with it deep consequences for the customer experience and a far-reaching impact on Europe’s online economy. Online businesses that fail to abide by these requirements to build additional authentication into their checkout flow will see a dramatic drop in approvals as banks become obligated to decline their transactions outright.”
– The Impact of SCA – SHAKING UP EUROPE’S ONLINE ECONOMY, Stripe
There will be some exemptions from SCA, notably for low value transactions – probably similar to the £30 for contactless payments – and for recurring payments. Even recurring payments is an issue as it will only be if the payment value is the same and many subscriptions offer a low cost sample or trial starter and so the second full value payment would require SCA to be approved and so require the consumer to reconfirm their subscription.
On the face of things reducing fraud is desirable and no one can really argue against it. However businesses have worked ever since the Internet started to reduce friction in the purchase flow so adding a new roadblock in is undesirable. Yes consumers may become accustomed to it just as they did with Verified by Visa.
In fact for myself, Verified by Visa was a joke as I could never remember my password and just reset it every time I was asked for it and invariably made up a totally random new password as it blocked you from reusing past passwords. If I could reset my password that easily then so could a hacker with a bit of social engineering and nowadays Verified by Visa never seems to want a password so looks like it’s been relaxed…. hopefully SCA will be relaxed in a similar manner but in the mean time the 14th of September could be a frustrating time for consumers and online merchants alike. If genuine buyers can’t buy that’s overkill in the attempt to crack down on fraud.
(Thanks to Chris from Chris Turton Ecommerce for the heads up on this news)