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First weekend of SCA sees smooth start as retailer transaction volumes unaffected

Wed Sep 18 10:00:00 BST 2019

  • Strong Customer Authentication (SCA) regulation from the EU came into effect on 14 September
  • Merchants have not been negatively impacted following the introduction of SCA, Barclaycard transaction data shows
  • Barclaycard’s dynamic fraud protection solution, Barclaycard Transact, also went live over the weekend to improve payment acceptance rates and reduce friction for shoppers

Barclaycard, the UK’s leading acquirer, has analysed its transaction data from 14 and 15 September to understand the initial impact of Strong Customer Authentication (SCA) on merchants and shoppers. Its findings offer good news: merchants have not seen an increase in abandoned transactions or declined payments.

SCA legislation came into force at the weekend across Europe and aims to tackle growing rates of fraud and cybercrime. It requires that all EEA transactions go through a two-factor authentication process, unless they qualify for an exemption*. One consequence of this change is that the authentication process will introduce a degree of friction to the shopper journey, which may result in an increase in cart abandonment, and ultimately in lost revenue for retailers. Banks across Europe are expected to ramp up the volume of consumer authentication requests over the coming months.

To help merchants prepare for the changes required by SCA, Barclaycard, which sees nearly half of the nation’s credit and debit card transactions, has launched Barclaycard Transact, which went live over the weekend.

The dynamic fraud protection solution enables businesses to benefit from SCA exemptions: trusted, low-risk transactions will continue to flow seamlessly, bypassing the two-factor authentication process mandated by SCA. In turn, payment acceptance rates are improved, resulting in fewer declined transactions and ensuring a smooth experience for shoppers. Higher-risk transactions requiring further inspection will still go through two-factor authentication, in accordance with the regulation.

Paul Adams, Director of Acquiring at Barclaycard Payment Solutions, said:

“Our data offers encouraging news for merchants, whose transaction volumes have been, so far, unaffected by the go-live of SCA.

“Barclaycard’s unique position as issuer and an acquirer means that we understand the concerns that both merchants and consumers have about SCA, and the balance the regulation necessitates between customer experience and security.

“We have designed Transact to help our customers get the most out of the incoming regulation, by enabling them to provide a smooth payment experience for their shoppers, while at the same time reducing risk and managing fraud.”

Myth-busting: Common misconceptions about the SCA regulation

  1. Merchants have until 2021 to act
    While the EBA announced that each member state can apply for extensions, merchants and banks do not have 18 months to invest in solutions. In the UK the FCA is expecting banks to increase authentication requests from February 2020.
  2. Multi-market and single-market businesses face the same challenges in preparing for SCA
    The EBA’s recent announcement means that the Financial Conduct Authority, the Central Bank of Ireland and each of their European counterparts have the flexibility to impose their own compliance deadlines, as a result country-specific exceptions have the potential to cause quite a lot of confusion. For merchants operating in more than one country, things get complicated, because they could be subject to multiple overlapping deadlines. To minimise any complexity, merchants should work with their payment acquirer to prepare to be compliant.
  3. Issuing One-Time Passcodes (OTPs) is enough to pass SCA
    The EBA has made it clear that OTPs, like credit card numbers, qualify as ‘possession factors’ under SCA, i.e. a piece of information in the consumer’s possession – not ‘knowledge factors’, i.e. something they know. Those issuers who had planned to use OTPs in conjunction with card details – another ‘possession factor’ – to pass SCA will need to ensure their authentication journey is still compliant.
  4. SCA will have a negative impact on sales and revenue
    These concerns are not entirely unfounded – while the primary purpose of SCA remains to tackle cybercrime, SCA will introduce friction into the shopper journey, and this friction could lead to an increase in basket abandonment, resulting in a decline in sales. The good news is, with slicker 3DS2 authentication and optimised use of exemptions for low-risk transactions, merchants can mitigate negative impact.

Notes to editors

For more information about what SCA means for businesses, visit: www.barclaycard.co.uk/business/help-and-support/psd2-impact-business/taking-secure-payments

* Exemptions can be applied in different scenarios):

  • Contactless
    Transactions below €50/£30 (valued up to €150/£130).
  • Unattended terminals
    For transport fare or a parking fee
  • Low value transactions
    Transactions below €30 (£30) are exempt up to five consecutive transactions or accumulated valued up to €100 (£90).
  • Recurring payments
    Series of payments of the same value to the same merchant (such as subscription).
  • Secure corporate payments
    Provided a corporate payment is made via a secured channel other than authentication.
  • Trusted merchant (or whitelisting)
    Customers can choose to ‘whitelist’ a merchant they trust with their issuer. Once whitelisted, subsequent transactions are exempt.
  • Low risk transactions
    Transactions deemed low risk by the merchant’s fraud solution provider, using transaction risk analysis (TRA

Note: Merchants are not allowed to trigger low risk transaction exemptions themselves – they need to engage a payment services provider (PSP) to trigger them on their behalf. The higher the transaction value, the better the PSP’s fraud performance needs to be in order to grant the exception.

For more information, press only:

For more information, contact Phillipa Russell at Barclaycard on 0207 116 5473 or at phillipa.russell@barclaycard.co.uk.

About Barclaycard

Barclaycard, part of Barclays Bank PLC, is a leading global payment business that helps consumers, retailers and businesses to make and take payments flexibly, and to access short-term credit and point-of-sale finance. In 2018 we processed nearly £268bn in transactions globally. Barclaycard is a pioneer of new forms of payment and is at the forefront of developing viable contactless and mobile payment schemes for today and cutting-edge forms of payment for the future. We also partner with a wide range of organisations across the globe to offer their customers or members payment options and credit. 

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