The Retailer Spring Edition 2021

THE RE TA I L ER

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A FIVE-POINT CHECKLIST FOR SEAMLESS SCA

Shagun Varshney Senior Product Manager Signifyd

I t’s safe to say this past year or so has been a rollercoaster ride, with twists and turns that aren’t slowing down. With the pandemic and Brexit, we’ve all been kept on our socially distanced toes. And now — more changes are coming for retailers. The latest challenge coming down the pike, for those in the UK, is the enforcement of Strong Customer Authentication (SCA). After much delay, it’s set to hit the UK shores on 14, September. So, howdo retailers prepare themselves? It’s not too late to get your SCA game on, so stick with us here. First off, The Payment Service Directive 2 (ie. PSD2) is a far-reaching payment regulation covering online transactions for businesses in the European Economic Area. The EU first passed SCA five years ago as part of PSD2 to better protect customers and merchants from online fraud. Its original September 2019 enforcement datewas pushed backwhile complications and kinks were ironed out. In short, SCA requires a stringent two-factor authentication to approve online transactions, whichmust be authenticated by two out of these three: • And something the user is - fingerprints, facial recognition etc. So how can UK brands and merchants prepare for the new regulatory environment? Here are five tips: 1. Believe You need to move from denial into action and develop a growth mind - set. Enforcement of SCA is coming so it’s time to do what you need to do to get prepared. Mantras, meditation and graffiti around the house — enforcement is on the way! If you’re not prepared, you’ll be saying goodbye to good customers. • Something the user knows - like a passcode • Something they have - like a mobile phone

2. Become a Ph.D in 3DS Not all 3D Secure is created equally. Whilst EMVCo’s 3D Secure is the standard protocol to authenticate online credit and debit purchases, the version that many retailers use is not up to the task. Version 1 of the backbone of SCA is leading to abandonment rates of 25%-plus. Before SCA, these figures were in the single-digit percentages. Not to mention the long authentication process required — between one and two minutes — a long time in this instant world where people just aren’t prepared to wait. Customers also get frustrated with two-factor authentication and are prone to give up halfway through the process. In fact, 46.5% of consumers surveyed said they were somewhat or very likely to give up on a transaction requiring two-factor authentication, according to polling conducted for Signifyd bymarket researcher Upwave. What’s needed is the upgraded 3D Secure 2.2. If you believe a transaction is exempt and your bank doesn’t, it allows for a soft decline or an appeal (which V.1 cannot do). V.2 is also mobile-ready — a key to conversion, given the huge number of orders placed on mobile. 3. Mind your fraud rate 3D Secure 2.2 can also much better accommodate exemp - tions allowed by SCA. These can make the difference in whether SCA is a manageable aspect of your business. SCA relies on another abbreviation: TRA. TRA, or Transaction Risk Analysis, is your new best friend, as it allows for exemptions if you maintain very low fraud rates. With an exceedingly low fraud rate of .01% or below, low-risk pur - chases under €500 are exempt; fraud rates of .06% and .13%will allow exemptions for low-risk purchases under €250 and €100 respectively. All this to say, if you keep your fraud rate low and if the vast majority of your transactions involve low order values, SCAmight not affect you as much as you thought. Except ... 4. Get intoyour service provider’s business TRA scrutinizes your payment service provider’s fraud rate as well as your own. Yes, your PSP needs to maintain the same low rates for you to take advantage of TRA. The PSP that handles your credit card transactions needs to take fraud as seriously as you do and you need to be on the same page.

of your business”. ‘‘

Exemptions can make the difference in whether SCA is a manageable aspect