Fragmented implementation of SCA adds complexity for retailers, Adyen

The delayed implementation of Strong Customer Authentication (SCA) across European countries has created a complex environment for retailers selling goods around the EU, according to Adyen.

The legislation, implemented under the European Union’s Payment Service Directive (PSD2), required merchants to offer SCA for online transactions to help protect customers against fraud. Research commissioned earlier this year by Adyen, found that 57% of retailers reported an increase in the level of fraudulent transactions compared to the same time last year. It also found that just one in five were ready for new payment regulations that were supposed to take effect this month.

The legislation was originally slated for 14th September, but the UK and several other nations have announced implementation delays. The timelines and milestones for implementation are not fixed and vary from country to country. However, merchants selling goods to customers in the countries that have not delayed implementation of SCA will need to comply with the legislation for transactions from those countries. Analysis of Adyen’s platform data has revealed that no UK bank has mandated SCA under the regulation as of 16th September, increasing the complexity for UK retailers to meet the SCA regulations with compliant countries.

Myles Dawson, UK Managing Director at Adyen, says: “The intention for the delayed implementation was to simplify the equation for businesses, but the reality is far from simple for anyone selling across borders. Now, they must examine the origin of each transaction and determine if it is a country that is enforcing SCA. If the transaction originated in one of these countries and they cannot comply with SCA, they will have to decline the transaction. That means lost sales. Thankfully our Authentication Engine can deal with this additional complexity on behalf of our merchants.”

“The only way forward for retailers is to become SCA ready and to have a dynamic authentication system that can automatically determine the SCA requirements of each transaction. They will also need to be monitored regularly, as the implementation date varies between different countries.”

Adyen’s iteration of the industry-led solution, 3DS2, helps merchants comply with new strong customer authentication regulations with minimal input from the consumer. The additional verification will take place ‘silently in the background’ as the customer checks out or present a challenge for the customer to authenticate. Additionally, the Authentication Engine helps merchants navigate the various complexities of exemptions, and delayed timelines by issuers both in the EU and globally. With many eyeing up the EU’s progress there is the chance the PSD2 may be adopted by other regions in the future.

For more information about Adyen’s 3D Secure 2 and Authentication Engine solutions, click here.