Why strong customer authentication benefits merchants

By Ed Whitehead
Ed Whitehead, Managing Director of EMEA for Signifyd, discusses the importance of strong customer authentication (SCA) within fintech

When the new Strong Customer Authentication (SCA) regulations were put in place, the goal was clear – reducing ecommerce fraud. But the two-factor authentication has also created significant friction in the customer journey.

Merchants are trying to navigate the new regulations and ease the process, but there are gaps in customers’ awareness of the new regulations coming in place. A lack of information is causing customers to abandon their carts or retailers for good, thus impacting merchants’ revenue.

In order to evaluate consumer awareness of SCA and their stance on it, the ecommerce fraud protection platform Signifyd conducted a survey of 2,000 consumers each in the UK, Italy, and France in collaboration with OnePoll, and presented the results in an ebook.

We explore why customer awareness of SCA regulations is crucial and what merchants can do to mitigate these issues.

How is SCA affecting customers?

Due to the rising fraud pressures as a result of the boom in ecommerce sales, new payment regulations have been implemented across Europe and the UK. The Payment Service Directive 2 (PSD2) mandates Strong Customer Authentication (SCA). Its aim is to ensure the legitimacy of online orders, maintain the customers’ trust in online purchases, and sustain the growth of the ecommerce economy.

Customers have to complete a two-factor authentication during the online checkout process to validate their identity.

They have to choose two out of three independent authentication factors, including:

  •      Something the customer knows (e.g., password, PIN, secret answer)
  •      Something the customer has (e.g., mobile phone or token used to make the purchase)
  •      Something the customer is (e.g., fingertip, voice recognition, face recognition)

All in-scope ecommerce transactions within the EEA area are subject to SCA.

Are consumers aware of SCA?

Regardless of the new changes that came with full enforcement in Europe and the UK, consumers are lacking sufficient awareness of SCA.

Signifyd’s customer awareness survey shows that a little more than half of UK respondents (53%) are aware of SCA; and in Italy and France, this is less than a third of respondents.

As expected, the younger population is more aware of SCA than older age groups; and those aged 25–34 have the greatest awareness of the changes in all three countries. Unlike France and Italy, the UK is not seeing a major discrepancy between awareness in the various age groups.

Who is responsible for customers’ unawareness of SCA?

The responsibility to inform customers about the new regulations lies with the bank/card issuer. Nevertheless, 47% of the survey respondents haven’t received such information.

Once the communication has been sent, customers also need to take the time to familiarise themselves with the new process. Yet 16% of UK respondents who have received information about SCA have not read it. In Italy and France, respondents tend to neglect SCA communication more than in the UK.

Perhaps banks/card issuers can work in collaboration with merchants to propose better methods of communication regarding payment changes in order to increase awareness.

Moreover, merchants can also disseminate information about upcoming changes and use their websites and social media to highlight the new authentication process. That way, they’re instilling more trust in the process and securing more completed transactions.

What does customers’ unawareness of SCA lead to?

In today’s ecommerce landscape, customers are looking for speed and efficiency in the shopping experience. One negative review, or using the wrong font, can cause merchants to lose their customers. In fact, 80% of orders on mobile devices in the second quarter of 2022 in the UK were not complete. Retrospectively, 74% of orders made on a tablet and 72% on a computer were also incomplete.

With such high rates of cart abandonment, friction in the checkout process can be detrimental for purchases, especially when customers are not aware of SCA and its fraud prevention benefits. Signifyd’s survey shows that 33% of UK respondents have decided against shopping with a particular retailer after being asked to complete additional verification steps.

Friction in the checkout process can lead to a loss of customer loyalty altogether, as respondents in the UK claim that it takes 2.6 negative shopping experiences before they decide not to shop with a particular retailer again. And lastly, 68% of UK online shoppers are “likely” or “very likely” to go to a bigger retailer if they had a bad experience with a small company.

The new SCA regulations provide a framework for better ecommerce fraud protection. While merchants are navigating the new process, upping their customer retention game, and also rethinking the checkout experience, some online shoppers are sitting in the dark in terms of the changes. 

By working together with banks/card issuers, merchants can raise awareness of SCA and its benefits in order to reduce card abandonment and increase their revenue.

About the author: Ed Whitehead is the Managing Director of EMEA for Signifyd, where he leads a team dedicated to
the expansion and support of Signifyd's European client base.


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