Strong Customer Authentication: 5 Things Digital Marketers Should Be Doing to Prepare
By: Vince Howard
Tags: Digital Marketing, Financial Services, Customer Authentication, Sca, UX

Strong Customer Authentication: 5 Things Digital Marketers Should Be Doing to Prepare Vince Howard Apr 9·4 min read

If you are a Digital Marketer, you’re likely to be aware that the Second Payments Services Directive (PSD2), ushers in new security requirements for business that accept online card payments within the European Economic Area.

Starting from September 14th 2019 banks will begin declining card-not-present transactions (CNP) that don’t satisfy at least two of the three core elements of Strong Customer Authentication (SCA):

Why does this matter to Digital Marketers? Well, a longer payment process involving passwords, pins or fingerprints adds unwanted friction to the online payment process. And, as marketers, we know all too well that adding additional steps to the conversion funnel is a sure-fire way to lower conversion rates. In 2014, India implemented similar payment security measures. The result, an overnight drop in conversions of 25%. If this were to happen in Europe this would translate to close to €600bn being wiped off the online economy.

Why now?

SCA has been almost two years in the making and is the EU’s effort to stem the ever-rising trend of card-not-present fraud, which predominantly occurs in online shopping transactions. With European online commerce set to grow to €1tn by 2022 payment security must be more robust. Latest estimates from the ECB claim that each year €1.3bn is lost to card fraud.

Who will be affected?

For CNP transactions over €30, Banks, merchants and payment processors will have to implement two-factor authentication. Recurring payments are exempt and customers can whitelist businesses with their account provider so they don’t need to reauthenticate for every payment. With CNP fraud 10x that of in-store fraud, SCA regulation will be expected to bring down that ratio dramatically.

How should Digital and E-Commerce marketers prepare for SCA?

1. Ensure your analytics are set up to measure completion rates well before the September 14th deadline. Establishing what your average conversion rate is now, enables you to spot any drop off in conversions due to the added complication of verifying transactions. Knowing there’s an impact will ready you to take action.

2. Explore whether your payment service provider qualifies for SCA exemptions to minimise the impact of customer attrition related to payment friction. Under the new rules, exceptions may be allowed for businesses that can keep fraud levels below specified fraud reference rates. Transaction risk analysis tools can offer solutions that determine real-time, whether to wave through a transaction or apply SCA rules.

3. Experience what your customers will experience. If you are processing card payments as a merchant, be sure to run tests to understand what the user journey looks like with the added security steps in place. Staying ahead of the game gives you time to update helpdesk guidelines, staff training, chatbots and triggered email to assist customers who have abandoned carts or had payments declined.

Use the following resources to get dummy payment details to run tests on your check-out process:

4. Communicate. Appropriately. We can learn a thing or two from how companies communicated GDPR changes were communicated to end-users. Don’t be tempted to carpet bomb your customers with emails notifying them that they may face difficulty making payments. Do, however, plan which channels are appropriate and get your timing right. If you notice lower than average conversion rates in your analytics ramp up social media messages offering customers tips on how to navigate the added security steps. If you realise page exits increasing at a particular stage of the check out funnel add a message or banner to the page.

5. Ensure that your site offers different payment choices. We all forget passphrases, lose data and even lose our phones from time to time. Ensure these mishaps don’t prevent customers from completing transactions by including alternative ways to pay.

Adyen

Amazon Pay

Stripe

PayPal

WorldPay

While SCA measures may impact completion rates for purchases in the short term, consumers will soon adjust to the new standard of two-factor authentication for online card payments. Further down the road innovative ways of integrating two-factor authentication via biometrics and 3rd party payment providers will smoothen out the process to offer near-frictionless ways to guarantee compliance with the EU requirement for businesses.

Increasing consumer trust in online payments by making it harder for fraudsters is a positive step. There are efforts to delay the roll-out of SCA, but until there is word from the European Banking Authority to say otherwise be prepared for the September 14th deadline.