The Importance of Strong Customer Authentication (SCA) in Fraud Prevention 

Fraud involving cards, not present (CNP) is on the rise. Globally, CNP fraud is estimated to have cost businesses $35.5 billion in 2020, and as more consumers switch to online channels for product purchases, this figure is only expected to rise. 

Business owners must incorporate as much protection as possible into their online payment systems. Strong customer authentication should be given priority as one of the most crucial strategies (SCA). 

How does strong customer authentication work,  Strong Customer Authentication give online payments an additional layer of security. 

Strong Customer Authentication: What Is It? 

For those who don’t know, the second Payment Services Directive (PSD2) has included a new regulatory obligation for online firms in the European Economic Area (EEA) and the UK called Strong Customer Authentication (SCA) which attempts to reduce fraud. Additionally, it aims to lessen the danger brought on by offline contactless payments. 

As its name implies, strong customer authentication is substantially more reliable than traditional authentication procedures. As a result, you should normally include two or more of the following: 

  • A Characteristic Of The Client Themself (Such As Facial Or Fingerprint Recognition) 
  •  The Information Delivered To A Customer-Owned Device (Such As A Temporary Code) 
  •  Information That The Client Is Aware Of (Such As A Pin Or Password) 

Banks and online retailers will be compelled to reject transactions that fall short of these requirements once new regulations go into effect. 

Why is it crucial for online retailers?  

Online purchases are made more secure thanks to SCA. Some business owners are concerned that it asks for too much customer data. Some people worry that consumers won’t want to take the time to provide this information. In actuality, the advantages vastly exceed the disadvantages. 

However, it’s vital to remember that some transactions are excluded from these rules. 

These consist of: 

  • Recurring subscriptions
  • Low-risk transactions
  • Low-value transactions
  • Corporate transactions

It is crucial to remember these. Even though they might not follow SCA requirements, fraud may still happen. Combining SCA with a fraud prevention program can increase security with the least hassle.

With innovative machine learning technology, retailers can easily identify suspicious behavior and reduce the likelihood of fraud by adjusting friction. This can eventually save your company hundreds of dollars in chargeback remediation costs while maintaining a seamless payment process and approving more valid transactions. 

It’s Important to Use Strong Customer Authentication: 

Strong customer authentication will enable you to thwart fraudsters before they can harm your company. Otherwise, your defenses against fraud attempts won’t be as strong as they should be. This may easily lead to reputational harm for your company and increased costs for chargeback fraud. 

PSD1 and PSD2 are two pieces of legislation that completely changed the online transactions landscape. The PSD2’s robust customer authentication requirement creates a foundation for new payment services and gives users more security against cyberattacks while conducting web-based transactions. However, there are a lot of difficulties that SCA measures bring about in terms of user experience. 

It is the responsibility of card issuers, banks, and PSPs to provide frictionless customer experiences and secure online transactions. This is not only in their best interests but also in the interests of customers, financial institutions, and internet businesses. One of the greatest ways to do this is by providing a variety of flexible authentication choices and informing consumers about the advantages of SCA.

Initial friction will disappear as SCA methods grow quicker, easier to use, and more commonplace.

However, security threats continue to exist. Therefore all organizations that operate online should use caution. Financial services providers have gained a significant skill in handling security problems and protecting against potential attacks due to the strict regulatory framework in which they operate. Therefore, they have a key role in bringing these vulnerabilities to light so businesses can better defend themselves. 

Ultimately, internet companies and merchants must play a part in ensuring that SCA is not seen as a burden. They can likewise reassure their consumer base and lessen any early hesitancy by educating them about the security advantages of SCA. SCA will be around for a while, in the end. While there may be some initial confusion, as all consumers and businesses operating inside the EEA adjust to the new online transaction landscape that PSD2 has brought about, it will eventually become more natural.

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