Navigating the SCA Landscape: Balancing Security, Customer Experience & Fraud Prevention

The Growing Need for SCA in an Evolving Fraudulent Landscape

The rise of sophisticated fraud techniques has made securing online transactions a top priority in the ever-evolving world of ecommerce. Strong Customer Authentication (SCA) marks a significant change in how businesses, banks and consumers approach security. Merchants are working hard to comply with SCA regulations which, in the UK are governed by the Financial Conduct Authority (FCA). But in doing so, they face a difficult balancing act – that of tightening fraud defences, without damaging the customer experience. As merchants navigate these challenges, it’s important to understand the real-world impact SCA has on customer satisfaction and fraud prevention, including its role in reducing chargebacks and addressing new fraud risks.

SCA Implementation: Balancing Customer Experience with Security

A merchant’s ultimate goal is to offer a seamless, enjoyable shopping experience that drives valuable revenue. Any friction at checkout should only be there if it is vital, because this is the point at which most customers, out of either frustration or lack of time, will abandon a cart that comes with numerous interruptions, ultimately costing the merchant lost revenue. Therefore, to successfully navigate this challenge, merchants should explore ways to integrate SCA into their payment processes without causing additional friction.

SCA is a two-factor authentication process that proves that a customer is who they say they are, with specific rules around what constitutes ‘authentication’. It offers a robust way to authenticate online payments by requiring two of three elements of verification. The three elements are something known (like a password, a PIN, or an answer to a tricky question), something owned (like a mobile phone, a smartwatch, or a card), and something inherent (like a voice pattern, a fingerprint, or facial recognition).

Using these three elements, merchants can apply different levels of scrutiny based on the perceived level of risk. For example, low-risk transactions might require minimal verification, while higher-risk transactions would trigger more stringent checks. By putting user experience and reduced friction as a priority, merchants can maintain customer trust and loyalty while at the same time comply with SCA regulations.

Equally important, is to mitigate any initial resistance customers may feel towards additional authentication steps by educating them about the importance of SCA in protecting their financial information. By demonstrating that these measures are designed with their safety in mind, merchants can foster a more positive view of SCA. In essence, this careful approach ensures that enhanced security does not come at the expense of customer satisfaction, (rather at that of prevalent fraudsters), enabling merchants to create a secure, yet inviting shopping environment that meets the demands of today’s consumers.

Merchants Still Adjusting: Overcoming the Operational Challenges of SCA

Even after the successful implementation of SCA regulations in March 2022, merchants continue to navigate various operational challenges as they refine their processes to comply with these requirements. The move meant significant updates to payment systems and technology, and many merchants are still in the process of integrating new authentication methods into their existing infrastructure. This ongoing adaption involves not only upgrading technology but also training staff to understand the intricacies of SCA and effectively handle customer inquiries related to the authentication processes.

Merchants must also manage different compliance timelines among different payment service providers (PSPs) which can create frustrating inconsistencies in the application of SCA across platforms. This may lead to customer confusion or irritability, and in turn, complicate efforts to maintain a smooth shopping experience.

To navigate these challenges, merchants are continuously refining their operations to align with SCA requirements whilst minimising friction at the checkout stage. This way, merchants can enhance security, reduce chargebacks and build lasting customer trust in an increasingly regulated environment.

Unlocking Operational Benefits: How SCA Enhances Merchant Success

While the challenges of implementing SCA are significant, the benefits it offers merchants are equally compelling. One of the most notable advantages is the enhancement of customer trust. When friction is kept to a minimum, but at the same time customers are assured that their transactions are protected by robust authentication methods, they are more likely to complete their transaction and return for future purchases. This increased trust can lead to higher conversion rates and increased customer loyalty, meaning long-term revenue growth for merchants.SCA Implementation: The Chargeback Factor

As merchants navigate the increasingly complex landscape of online transactions, SCA stands out as a vital tool in the fight against chargebacks. By requiring two out of three authentication factors, SCA introduces an additional layer of security that significantly reduces the risk of unauthorised transactions. However, the evolving payments industry continues to present challenges, as fraudsters step up a gear and adapt their tactics to exploit any vulnerability.

While SCA can help diminish the frequency of friendly fraud claims by making it more difficult for customers to dispute legitimate transactions, it does not completely eliminate the risk. Friendly fraud remains a concern, as some consumers may still file disputes out of confusion or as a result of buyer’s remorse, leading to chargebacks. Because of this, and despite the enhanced security measures offered by SCA, merchants must remain vigilant and proactive in their chargeback management strategies. By being prepared for the possibility of chargebacks, it is important to implement a robust system to manage and respond to them effectively. In an environment where both fraud and customer behaviour continue to evolve, a multifaceted approach to chargeback prevention remains essential for saving revenue and maintaining healthy customer relationships.

Maximising Security and Customer Trust: The Long-Term Benefits of SCA

By effectively reducing vulnerabilities to fraud, SCA both protects the customer but also enables merchants to maintain customer loyalty, lower their chargeback rates and minimise losses associated with fraudulent transactions. As a result, the initial investment in SCA compliance can yield significant returns, positioning merchants to thrive in the increasingly competitive and regulated online marketplace. Furthermore, such technologies encourage ongoing innovation within the payments industry, as businesses strive to improve both security and customer experience, ultimately benefiting all involved.