Half of retailers are not ready for authentication requirements coming into force in September
PSD2’s Strong Customer Authentication (SCA) requirements, set to set to go live in Europe on 14 September this year, will do much to improve the security of online transactions and increase consumer trust in eCommerce.
However, new research suggests that the implementation of SCA will have a huge impact on retailers, with the possibility of a loss of £50 billion in economic activity in the first year. According to digital commerce consultancy Tryzens, online retailers must take action now to streamline and optimise their payment processes to prevent the new regulations from impacting the user experience.
PSD2 came into force in January 2018, bringing with it wide-reaching implications for companies across Europe that deal with payments, ranging from the regulation of Third-Party Providers to consumer payment protection. SCA, a key element of PSD2, will require merchants to introduce two-factor authentication for transactions with a value of over €30, forcing customers to take extra steps to prove their identity, potentially relying on biometric methods or one-time codes generated by the payment provider. However, customers have the option to “white list” trusted beneficiaries to streamline the payments process.
While these regulations will give added security to customers shopping online, data gathered by 451 Research has revealed that just 44% of retailers surveyed will be ready in time for the full implementation in September. Although retailers have had over a year to prepare for these changes, this data suggests that many have not yet invested in the correct software or processes to transition to SCA.
Commenting on the implications of the SCA requirement for retailers, Andy Burton, CEO of Tryzens, said: “Anything that helps to bolster security in eCommerce transactions should be welcomed, and we know that fraud is a real concern for shoppers today. A recent report indicated that UK consumers lost £261m in online fraud last year, and that 78 percent of all remote purchase fraud took place online. When we consider these figures, the enforcement of PSD2’s Strong Customer Authentication requirements can’t come soon enough.
“However, the data from 451 Research suggests that many retailers have made a worrying lack of progress in preparing for the new regulations. With consumers increasingly expecting a smooth, seamless experience when they shop online, the sudden demand for two-factor authentication may come as a shock, and perhaps even put them off purchasing from retailers who have not integrated the authentication process effectively into their platform.
“As a first step, retailers need to talk to their Payment Service Provider and find out when they will be PSD2 compliant and understand how this will impact customers. Once retailers understand how the update will impact their customers, they should start signposting on their payment pages and informing existing customers that this added authentication process is coming. Contacting customers will prepare them for the implementation of SCA and reduce the shock factor. Finally, it is imperative that customer service teams are trained before the update in September so they can inform and assist those who need help,” Burton continued.
“The regulations are only a few months away so it’s critical that retailers get on the front foot and start optimising their sites and payment processes now so they can keep the customer experience as seamless as possible when the requirements are introduced. Getting customers onto a website is one thing, but making them stay is another. If eCommerce retailers are not PSD2 compliant by September, they could be seeing a lot of empty baskets at the checkout,” Burton concluded.