A new report suggests that the implementation of new rules regarding online fraud in the UK could potentially disrupt the e-shopping experience. From March 14th, online retailers will be required to implement Strong Customer Authentication (SCA), which aims to combat the significant issue of online fraud that costs consumers £400 million annually.
Under the new regulations, customers will have to verify their identity for online purchases exceeding £25. This two-factor authentication will be mandatory during the checkout process. Shoppers will receive codes through text messages or prompts in their mobile banking app, which they must input or click on before completing their purchase. This authentication process will apply to the millions of online and app-based transactions that occur daily.
The Financial Conduct Authority has instructed retailers to implement the necessary cyber security software, known as ‘3DSecure’, by the deadline. Failure to comply with the regulations may lead to declined transactions and potential enforcement action.
According to recent data from Barclaycard Payments, since the implementation of SCA in February, over 1.2 million online transactions worth more than £100 million have been declined. Many online businesses have struggled to process transactions through SCA compliant channels, resulting in these declines. The data also reveals that 14% of shoppers have experienced an increase in declined payments, with 37% choosing to complete their purchase with a different retailer. Furthermore, 37% of shoppers stated that they are unlikely to shop with a merchant in the future if their payment is rejected without explanation. The checkout process itself also poses challenges, as 28% of shoppers abandon their baskets due to the lengthy time it takes to complete the payment.
While Barclaycard Payments has witnessed a gradual increase in the number of transactions subject to SCA checks, with 43,000 transactions worth £3.64 million being declined in February, their data highlights that 93% of transactions processed through their secure platform were approved on the first attempt compared to only 69% through less secure channels.
Rob Cameron, CEO of Barclaycard Payments, emphasizes the importance of providing a quick and seamless checkout experience for customers. He warns that if retailers do not prioritize making online purchases quick and easy for their customers, they will simply look elsewhere for their shopping needs. It is crucial for merchants to prioritize becoming compliant to avoid losing out on sales.
Useful links:
1. More information on Strong Customer Authentication (SCA)
2. Guidance on Strong Customer Authentication by the UK Government
