The Retailer Spring Edition 2022
THE RE TA I L ER
SCA: TURNING A REGULATORY REQUIREMENT INTO A COMPETITIVE ADVANTAGE
Akil Downes Commercial Director Checkout.com
A kil Downes, Commercial Director at Checkout.com explains how online retailers can increase the chances of a frictionless checkout under SCA. Over the past year, UK and European consumers and retailers have been getting used to extra security checks when they shop or bank online. Known as Strong Customer Authentication (SCA), these checks aim to make digital transac tions more secure and reduce the risk of fraud. It hasn’t been long since the regulatory require ments to apply SCA were fully implemented in the UK, and retailers have rightly been con cerned about the impact on conversion and revenue. We examine how retailers can turn SCA from a box-ticking compliance exercise into a source of competitive advantage. The experience so far Since SCArules came into effect, the retailer and consumer experience has been mixed. “Each merchant will experience it [SCA] slightly dif ferently based on the nature of their business,” said Dean Jordaan, Director of Payments at Microsoft, speaking during a recent Checkout. com webinar . And, while the authentication technology — 3DS — has been improvingwith the goal of enhancing the overall experience of SCA, this does not necessarilymean that the results are being felt by the industry in practice. “You introduce something new into the pay ments industry, and it takes time for the full ecosystem to develop a maturity around a new capability,” said Jordaan.
The fourmain exemptions for ecommerce businesses are: • Transaction Risk Analysis (TRA): When transactions are considered to have a low fraud risk based on the average fraud level of the pay ment service provider processing the transaction. • Low-value transactions: For payments less than £25, up to a maximum of five transactions or a cumulative limit of £85 since the cardholder's last successful authentication. • Trusted beneficiaries: When customers add sellers to a list of trusted beneficiaries held by their issuer. Sometimes known as ‘white listing’, this exemption is useful for regular customers as SCA is only required for the first transaction to set up the exemption. • Secure corporate payments: Those initiated through secure corporate systems and processes, such as centralized travel management sys tems, lodged and virtual cards. This is a view shared by Oliver Steeley, Head of Payments at Marks & Spencer. Speaking at the same Checkout.comwebinar, he said: “Our experience is that a good implementation of 3DS 2.1 is probably delivering better results than an average implementation of 2.2. We’re not really seeing issuer take-up of all the fea tures within [version] 2.2 yet – it will take a little while.” As a result, Marks & Spencer has seen differ ences in SCA acceptance rates between credit and debit cards, and between mobile-centric and more traditional card issuers.
Devising an SCA strategy “What we care about is the transaction success rate. What route or method should I send this payment through that gives me the highest chance of success?” said Steeley, summarizing what is top of mind for most retailers. So, what are the key considerations for online retailers when devising an SCA strategy? And where do exemptions fit in? Clearly, an SCA strategy should reflect the retailer’s business, risk profile, industry sector, customer base, and trading split across countries, channels and value bands. Not every transaction requires SCA. As many as half of all ecommerce transactions could be out of scope if certain criteria are met, accord ing to estimates fromVisa. These include mail order/telephone order payments, anonymous prepaid card payments, transactions where either the card issuer or acquirer is outside the EEA, and merchant-initiated transactions, such as installment, recurring and delayed payments. There are also SCAexemptions, including under transaction risk analysis (TRA) rules where acquirer fraud rates remain low, trusted ben eficiary payments where customers ‘white list’ sellers with their card issuers, and low-value transactions. It’s critical for retailers to understand customer journeys in the context of SCA, and to identify and correctly flag out-of-scope transactions and exemptions. This helps prevent unnecessary SCA challenges and possible declines for a more frictionless checkout.
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