What is SCA or Strong Customer Authentication?

SCA, or Strong Customer Authentication, is a requirement of the PSD2 (Second Payment Services Directive) regulation of the European Union. This regulation aims to enhance the security of electronic payment transactions and reduce the risk of fraud.

Strong Customer Authentication requires online payment transactions to be authorized using at least two of the following three elements:

1. Knowledge: Something only the user knows, such as a password or PIN.
2. Possession: Something only the user has, like a mobile phone or bank card.
3. Inherence: Something intrinsically related to the user, such as a fingerprint or facial recognition.

These elements must be independent of each other, meaning the breach of one should not compromise the security of the others.

SCA applies to "customer-initiated transactions" (when the customer initiates the electronic transaction and is present during the authentication process) within the European Economic Area (EEA). There are some exemptions to SCA, such as low-value payments, payments to trusted vendors, and certain types of recurring payments.

SCA in E-Commerce

Strong Customer Authentication (SCA) has a significant impact on e-commerce. Its implementation is geared towards improving security in online payment transactions and reducing fraud. This is particularly relevant to e-commerce, where transactions often occur without the customer being physically present.

Below are some key aspects of how SCA affects e-commerce:

• Change in Payment Experience: With SCA implementation, customers must provide at least two forms of authentication during the payment process. This can result in a slightly more complex and time-consuming payment experience.
• Adaptation of E-Commerce Platforms: Merchants and e-commerce platforms need to adapt to SCA. This involves working with their Payment Service Providers (PSPs) to ensure that payment processes comply with SCA requirements.
• SCA Exemptions: Certain exemptions to SCA may apply in e-commerce, such as low-risk transactions, low-value transactions (less than 30 EUR), recurring periodic payments, and payments to trusted beneficiaries. Merchants and PSPs can leverage these exemptions to offer a smoother user experience when possible.
• Impact on Sales Performance: While SCA aims to improve security, it could also increase the likelihood of cart abandonment if customers find the payment process too complicated. However, in the long run, the additional security offered by SCA may enhance customer trust and potentially boost online sales.
• Customer Support: Merchants may need to provide additional support to their customers to help them understand and navigate the new payment processes. This might include updates to the FAQ page, clear messaging during the payment process, and an efficient customer support line.

In conclusion, SCA has a substantial impact on e-commerce, presenting both challenges and opportunities for merchants and e-commerce platforms. Although adapting to these new regulations may require time and effort, it also represents an opportunity to improve security and customer trust.