Early enforcement of SCA impacting sales

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Ahead of the official UK enforcement date for PSD2, 14th March 2022, the FCA has promoted early enforcement of SCA by Issuing banks, without merchants being aware this is happening. Issuers now issue soft declines on transactions which have not been sent to 3DS and are not correctly flagged as either exempt or out of scope. As much as 75% payment traffic is now receiving a soft decline from the Issuer and being sent to 3DS, if it’s not flagged correctly. This percentage will only increase as the enforcement deadline approaches.

From the enforcement date onwards, PSD2 mandates that 100% of transactions that aren’t flagged as exempt or out of scope must be soft declined and sent to 3DS. This 3DS friction can lead to failed transactions and abandoned shopping carts. Forter estimates that as much as 30% of transactions will fail 3DS or be abandoned, once PSD2 is fully enforced.

What this means for merchants

As the official PSD2 enforcement date approaches, merchants will find that more and more of their revenue is at risk as more of their transactions are increasingly soft declined and sent to 3DS, if inappropriately flagged as an exemption or as out of scope. 

With more than half of transactions currently vulnerable to 3DS friction, this is impacting revenue now!

Forter has already helped customers respond to this steadily increasing friction, improving their auth rate for non-3DS transactions in some cases by 5-10%, by advising them to deploy their PSD2 strategy early. Ultimately this has had a positive impact on topline revenue. 

Once a company starts correctly and proactively flagging their lower risk transactions as exempt, and sending riskier transactions to 3DS, they will see the auth rate for non-3DS transactions increase.

What Merchants Should Do

Merchants need to start acting as if PSD2 is already being enforced – because it is! By deploying their PSD2 strategy and applying in-scope exemptions today. Flagging exemptions rather than sending nothing to 3DS dramatically increases the auth rate of the non-3DS transactions. 

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