The UK’s Financial Conduct Authority (FCA) aims to implement the PSD2 Strong Customer Authentication (SCA) in online retail in September. This will apply to online shoppers whose purchase is more than £27 in a single transaction and will require them to relay passwords sent to their mobile phone. However, this change is not welcomed by a group representing retailers, who have sent a letter to the FCA warning them of possible negative implications.
The letter states that three quarters of small online retailers lack the software for two-step verification, requests more time to prepare for SCA and warns this change will lead to customer confusion, abandoned purchases, a decline of valid transactions and poor customer experiences. Liberal Democrat MP Chuka Umunna claims that it could lead to the failure of nearly a third of e-commerce transactions. But the fact remains, payment service providers have had nearly two years to prepare since the initial announcement, and there is no valid excuse for the delay in its enforcement apart from an unwillingness to participate.
Why biometrics should be part of a retailer’s SCA solution
Consumer security should be of paramount importance and this change by the FCA will add a new layer of security which will not only protect merchants and customers but also boost consumer confidence in making online purchases.
However, deploying without using biometrics as an additional factor within a multi factor solution would be a retro step and very expensive to implement, hence the feedback from retailers. Banks and fintechs had the same concerns around the PSD2 SCA requirement, where the FCA is offering deadline extensions. Retailers would have to invest in customer passwords and then a second factor such as a hardware token or scanner technology, which will be extremely expensive to enroll and then authenticate on-demand. It would also need to be a digital/mobile solution that can engage customers on their device. The process should be embedded within the retailer’s mobile applications or the financial services’ consumer banking and payments mobile applications so, in order to gain adoption, it cannot be hardware based.
While SCA may present businesses and consumers with checkout challenges, biometric technology has the potential to alleviate these issues. Meanwhile, the technical challenges SCA poses may actually increase customer satisfaction by creating a more secure and frictionless experience.