Retailers risk losing out on £3.64 million each day as strong customer authentication comes into force

Online shoppers may find they need to confirm their identity more often when making payments from today, as new changes to combat fraud come into force.

The new strong customer authentication (SCA) requirements are a set of rules that will change how people confirm their identity when making online purchases. This applies to each of the millions of online and app-based transactions made every day and is designed to reduce the £376 million lost to online fraud in 2020.

The British Retail Consortium (BRC) said customers will be asked to prove their identity when making a purchase, by confirming two of three “factors”:

• Something they are – using a fingerprint or facial ID, for example
• Something they know, such as a passcode or password
• Something they have, such as their mobile phone

It means that, for example, customers may now find they are asked to verify a purchase via text message more often, receiving a passcode which they are then prompted to enter on screen.

Barclaycard Payments, which processes £1 in every £3 spent in the UK, is warning all online retailers of the need to be ready for SCA. If websites aren’t SCA compliant, many transactions will be declined and they risk losing sales, as well as damaging customer loyalty.

This warning comes as new data, released today from Barclaycard Payments, saw 43,000 transactions a day, worth £3.64 million declined at the point of sale in February, as online businesses were not able to route transactions through an SCA compliant channel.

A spokeswoman for banking and finance industry trade association UK Finance said SCA “is an important tool in the fight against fraud, adding an additional layer of protection when people pay online using a card”.

She continued: “When a customer makes a payment online, their bank or payment provider will need to verify who they are before the transaction will go through. This can be done in a number of ways, including a one-time password sent via text, receiving a phone call, or signing into a bank app.”

Whilst the changes have applied to some transactions for some time, the proportion of transactions for which SCA requirements apply has been steadily increasing since the start of this year as merchants and payment service providers prepare to comply.

Tom Ironside, Director of Business and Regulation at the BRC, added: “Retailers have been working hard to prepare for the strong customer authentication requirements, ensuring online purchases are both as safe and easy as possible.

“The BRC and our members have worked with suppliers to ensure multiple fraud checks are performed behind the scenes and any additional friction is kept to a minimum. Customers should be reassured that buying online has never been safer.”

Rob Cameron, CEO of Barclaycard Payments, concluded: “The introduction of mandatory SCA is the most significant payments milestone since the rollout of Chip & Pin more than 16 years ago. While the new regulation is a positive step to keep customers’ data safe online, our research shows that shoppers are inclined to abandon transactions if it takes too long to check-out, demonstrating how important it is for businesses to have sophisticated fraud checks in place.

“Merchants who aren’t yet ready should start to prioritise becoming compliant to avoid losing out on sales.The message to retailers is clear; if you don’t make buying online quick and easy for your customers they will simply go elsewhere.”