According to available data, the payments industry has effectively managed online risk, with payment fraud rates consistently declining at the European level over the last 6 years. Regardless, the European Banking Authority has mandated strict guidelines that require Strong Customer Authentication (SCA) for a number of online payment transactions.
SCA is a strict and burdensome process, requiring customers to actively intervene in authenticating all transactions regardless of their risk. This negatively impacts the customer’s online experience and results in increased transaction abandonment.
A valid alternative to SCA is Targeted Authentication, which applies authentication techniques commensurate to the risks associated with each transaction, adjusting the level of customer intervention accordingly. Targeted Authentication has proven to offer fraud prevention levels matching those of traditional strong authentication techniques without deteriorating customer experience, ultimately leading to higher conversion at checkout.
Regulators can ensure a high level of security and a low level of fraud by setting a quantitative fraud rate level. Payment service providers that achieve levels of payment fraud at or below the determined rate should be allowed to offer authentication techniques alternative to SCA.
This would provide more tangible benefits for consumers now and in the future than mandating a technique and foster ongoing development of innovative fraud prevention solutions against continuous and increasingly sophisticated fraudsters’ attacks.
The opportunity to offer authentication techniques that bring higher conversion would also stimulate investments in innovation, healthy competition and e-commerce growth in Europe.