Signifyd: Minimising SCA disruption & increasing conversion

We speak to Signifyd’s Amal Ahmed, on ways businesses can minimise disruption from Strong Customer Authentication rules while increasing conversion rates

FinTech Magazine speaks to Director of Financial Services and EMEA Marketing at Signifyd, Amal Ahmed, on ways retailers and other businesses can minimise disruptions that customer authentication rules may cause. 

Introduced in 2020, PSD2 Strong Customer Authentication (SCA) – a part of the Payment Services Directive 2 (PDS2) regulation in the EU – had one aim: to make digital commerce more secure.

But with the protection against fraudulent orders came another effect merchants were not prepared for. The two-factor authentication customers are required to complete upon checkout causes friction in the customer experience. What this means for merchants is lower conversion rates and potential revenue losses.

Below, we explore with Ahmed how SCA has caused disruption to the customer journey and what merchants can do to ensure a friction-free experience.

How has SCA caused frustration for consumers at the checkout? 

In our survey aiming to determine customers’ awareness of SCA across France, Italy, and the UK, 71% of UK respondents ranked their frustration with the new implementation at five or higher (out of ten). In France, that number was even higher – 80%.

The reason consumers experience frustration is that the SCA requirement involves completing additional steps to verify their identity upon checkout. 

This makes the process longer and tedious, which doesn’t align with customers’ demands for a quick and efficient online shopping experience.

Has this led to increased cart abandonment from consumers? 

Customers’ frustration with the checkout experience is only one side of the coin. Most online shoppers wouldn’t stay at the frustration stage and would take further action to ratify their own negative experiences.

The survey shows that 33% of UK respondents have decided against shopping with a particular retailer due to a frustrating experience. 

Additionally, it takes two or fewer bad checkout experiences with one retailer for 37% of the UK respondents before abandoning the business for good.

Has SCA increased competition in the e-commerce space? 

Well, what do shoppers do after deciding against shopping with a particular retailer? They go to their rivals. 

Often, small businesses would suffer in favour of giant retailers, such as Amazon and Alibaba, who are able to offer faster and more efficient services due to the scale of their business. 

Not only that but they also offer a range of products from various merchants, so it’s likely that a consumer would find what they’re looking for at those marketplaces.

According to our survey, 68% of respondents in the UK are “likely” or “very likely” to seek the same product with a larger company, meaning that convenience wins over loyalty.

There is hope in sight, however, as shoppers are starting to favour smaller and independent businesses. 

That means that you have the backup from consumers’ interests and preferences, and when matched with a robust SCA strategy, you stand higher chances of retaining customer loyalty.

How can e-commerce platforms develop SCA strategies to deal with this issue? 

The effects of the negative checkout experiences for merchants are also frustrating. In fact, the CMSPI’s September Impact Assessment shows that the European average transaction failure rate is 29% post-SCA enforcement as of September 2021.

According to data from Barclaycard Payments, £130m worth of sales have been lost in the first month of the SCA enforcement in the UK, meaning that more than 22,000 transactions worth £4.3m have been declined per day.

While SCA is causing disruption in the checkout experience, it is serving its purpose to reduce fraud attacks and protect both merchants and consumers.

With the right use of tools, you can minimise friction and reap the benefits of fraud protection that PDS2 bring. It all feeds into developing a robust SCA strategy.

There are two key elements that inform a well-executed SCA strategy: smart use of exemptions and low fraud rate.

Certain transactions, such as low value, mail order to telephone order (MOTO), reoccurring transactions, and trusted beneficiaries, can be exempt from SCA if the right protocols are followed. 

What can help you navigate exemptions is implementing smart exemption engines that automatically detect transactions that fall into the exemption scope.

One type of exemption merchants can utilise is called Transaction Risk Analysis (TRA). 

Based on the merchant’s fraud rate, transactions up to €500 (US$535) can be made exempt. The lower the fraud rate is, the higher the value of potential exempt transactions is.

To keep a low fraud rate, merchants can implement a robust fraud solution that detects fraudulent transactions and approves more good orders. This will also increase the authorisation rate and lead to better conversion.

While SCA is putting a stop to the frictionless checkout experience both merchants and consumers are used to, the new regulations are here to improve the world of e-commerce in the long run. 

What merchants need to do is adapt to the new changes and implement tools and solutions that have the power to turn the game around.


For more insights from FinTech Magazine, you can see our latest edition of FinTech Magazine here, or you can follow us on LinkedIn and Twitter.

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