The Retailer Spring Edition 2022

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Customer comms and payment relationships

What does this mean for retailers? SCA has the potential to reduce ecommerce card fraud in the same way that chip and PIN reduced cardholder present fraud. It offers a layer of protection against the fraudulent use of accounts. And shifts liability from retailers to card issuers in most cases. Leaning into it puts retailers in the driver’s seat. However, there’s a balance to be struck between minimizing fraud losses and operational costs, optimizing the customer experience and max imizing revenue. No one says this is easy. But the good news is there is no one right way to balance these factors or devise an SCA strategy. Each retailer can tailor and tweak their SCA approach for competitive advantage, depending on their own circumstances. And they should be able to drawon the local knowledge, experience and expertise of their payment partner to do so.

The main out-of-scope scenarios for remote transactions include: • Merchant initiated transactions (MITs): This is a large group of transactions, including recurring, installment or prepaid payment, credential on file, delayed charges and reauthorizations, amongst others. SCA may be required to set up such arrangements, mainly if initiated through a remote channel. However, once in place, merchants may initiate subsequent payments without applying SCA requirements. • Mail order/telephone order: Payments made by mail order or over the phone fall outside the scope of SCA. • One leg out: When either the card issuer or acquirer are outside the EEA – for example, when a card issued in Japan is used at the website of a German merchant. Authentication should be applied on a best-effort basis, but issu ers must not decline one-leg-out authorization requests if they are out of scope. • Anonymous transactions: For example, prepaid gift cards issued without an identifiable cardholder name.

In practical terms, retailers are also reviewing their customer communications on the front end, as well as their payment relationships on the back end. For example, Marks & Spencer has changed the way inwhich it presents payment options to customers. “If you’re paying on a device that supports Apple Pay, you may be presented with this as your default in away that maybe youweren’t before. If your authentication abandons, you may get an email from us that we perhaps wouldn’t have sent before,” explained Steeley. When it comes to payment partners, in the past retailers may have chosen an acquirer based on their transaction success rates or pricing. Nowadays other factors are in play. That’s because acquirers must have a sufficiently low fraud rate across their portfolio to offer merchants a TRA (low fraud rate) exemption. “We’re thinking slightly differently about orches tration at the back end. And about whether we’ve got the right partners for the acquiring and gateway journey. Never before have we really thought about the acquirer fraud rate and what that means for us. It does create a different dynamic in the acquiring market,” concluded Steeley.

Akil Downes sales@checkout.com