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Non-uniform implementation of PSD2 SCA sees UK merchants facing a new challenge selling into Europe, experts warn

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Non-uniform implementation of PSD2 SCA sees UK merchants facing a new challenge selling into Europe, experts warn

The delayed implementation of PSD2’s Strong Customer Authentication (SCA) across some European countries has created a complex environment for retailers selling goods across the EU, experts warn.

The SCA legislation, implemented under the European Union’s Payment Service Directive (PSD2) required merchants to offer SCA for online transactions to help protect customers against fraud.

The legislation was originally slated for 14 September, but the UK and several other nations have announced implementation delays. The timelines and milestones for implementation are not fixed and vary from country to country.

However, merchants selling goods to customers in the countries that have not delayed implementation of SCA will need to comply with the legislation for transactions from those countries.

Analysis by experts at Adyen of its own platform data reveals that no UK bank has mandated SCA under the regulation as of the 16th September increasing the complexity for UK retailers to meet the SCA regulations with compliant countries.

Further, research commissioned earlier this year by Adyen, found that more than half of retailers (57%) reported an increase in the level of fraudulent transactions compared to the same time last year. It also found that just one in five (22%) retailers were ready for new payment regulations that were supposed to take effect this month.

Myles Dawson, UK Managing Director of Adyen comments: “The intention for the delayed implementation was to simplify the equation for businesses, but the reality is far from simple for anyone selling across borders. Now, they must examine the origin of each transaction and determine if it is a country that is enforcing SCA. If the transaction originated in one of these countries and they cannot comply with SCA, they will have to decline the transaction. That means lost sales. Thankfully Adyen’s Authentication Engine can deal with this additional complexity on behalf of our merchants.”

He continues: “The only way forward for retailers is to become SCA ready and to have a dynamic authentication system that can automatically determine the SCA requirements of each transaction. They will also need to be monitored regularly, as the implementation date varies between different countries.”

Adyen’s iteration of the industry-led solution, 3DS2, helps merchants comply with new strong customer authentication regulations with minimal input from the consumer. The additional verification will take place ‘silently in the background’ as the customer checks out or present a challenge for the customer to authenticate.

Additionally, Adyen’s Authentication Engine helps merchants navigate the various complexities of exemptions, and delayed timelines by issuers both in the EU and globally. With many eyeing up the EU’s progress there is the chance the PSD2 may be adopted by other regions in the future.

SCA already in the dog house

This latest problem with PSD2 SCA only adds to its woes. A recent study also found that, even when it is implemented, it is going to put a lot of people off online shopping. 

According to research by Forter, as many as half of UK consumers (49%) are likely to abandon future online and mobile purchases if faced with a multi-step authentication process as promised by PSD2 SCA.

According to the research, when faced with a multi-step authentication process on average around half of UK consumers (49%) are likely to abandon future purchases, highlighting the importance for merchants and PSPs to prepare ahead of the delayed 2021 deadline to avoid unnecessary purchase friction where possible.

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