Customers must now prove their identity when shopping online as two-factor authentication becomes mandatory for ecommerce in the UK.

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SCA will require shoppers to verify themselves with each online transaction

Following the introduction of Strong Customer Authentication (SCA), retailers must now ensure their sites are compliant with the new regulation.

SCA will require shoppers to verify themselves each time an online transaction occurs by entering a one-time password alongside their card details. This could include verifying a purchase via text message or a designated app.

The new requirements are designed to tackle the amount of money lost to online fraud, with SCA regulation for online shopping following the introduction of two-step verification for online banking by the Financial Conduct Authority in March 2020. 

Verification will be required for the majority of purchases over £25 or multiple lower-value transactions, according to UK Finance.

For subscriptions or repeat payments, identity may need to be verified for the first transaction. 

Mastercard now expects about 25% of online transactions to require some form of extra verification by the customer, compared with only 1% of online purchases previously.

British Retail Consortium director of business and regulation Tom Ironside said: “Retailers have been working hard to prepare for the SCA requirements, ensuring online purchases are both as safe and easy as possible.”

However, according to data collected by Barclaycard, more than 1.2 million online transactions worth more than £100m were declined last month as SCA began rolling out in advance of the deadline this week.

Some online businesses were not able to transfer the purchase through an SCA-compliant channel in the month before the new regulation was enforced, resulting in a terminated transaction.

Barclaycard reported that it saw 43,000 rejected transactions worth £3.65m a day in February as many retailers did not have an SCA solution in place to process the payment. 

Global payments platform Adyen reported in its own research that 44% of businesses currently did not have an SCA solution in place.

Barclaycard also found that 14% of shoppers noticed an increase in online payments being declined in recent weeks, while 37% of those that faced difficulties with the verification process completed their purchase with another retailer. 

A further 37% stated that they would be unlikely to shop with an online retailer again if their payment was rejected, while 28% also abandoned the purchase at the checkout stage due to a lengthy payment process.

Open banking platform TrueLayer’s head of public policy Jack Wilson explained: “SCA has been introduced because of the fraud risks associated with using debit and credit cards for online purchases, in particular criminals using stolen card details to make payments. Action in this space is welcome and long overdue.

“TrueLayer has analysed a range of UK card payment flows and found that there are now significantly more steps to complete a purchase with a card.

“Evidence from other European markets where SCA for cards was implemented earlier than in the UK is that this adds friction to online purchases, hitting revenues and margins for retailers while leaving consumers confused.”

Barclaycard Payments chief executive Rob Cameron said: “The introduction of mandatory SCA is the most significant payments milestone since the rollout of chip and 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. Our data has already shown the impact of not being prepared and this will only get worse if steps are not taken now.

“The message to retailers is clear; if you don’t make buying online quick and easy for your customers they will simply go elsewhere.”

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