In the United Kingdom, Strong Customer Authentication (SCA) may have a rather bumpy road to implementation.
The Emerging Payments Association said in a report released Tuesday (July 30) that merchants in the U.K. are decidedly not ready to tackle the SCA rules mandated by the second Payment Services Directive (PSD2).
“This research has found a distinct lack of market readiness amongst all key stakeholders,” the EPA said in the report.
As has been widely reported, the rules will come into place on Sept. 14. As part of SCA, consumers who are based in Europe will need to confirm their identities in order for online transactions to proceed. They must satisfy two authentication hurdles (out of three on offer) — which can be something they know, such as a password; something they have, such as a mobile device; or something they are, which includes biometric identification.
The report, titled “Issuer Declines,” found that 75 percent of issuers surveyed will be ready to comply with the rules, but a smooth operational transition may be a bit tougher. Another 17 percent said they would be ready by the end of the year.
The insights come from responses from firms that collectively issue more than 107 million cards, which the EPA said encompasses 61 percent of cards issued in the U.K., spanning 13 issuers.
Roughly three quarters, or 74 percent, of issuers see SCA spurring a decline in user experience. As many as 58 percent said too much friction is being applied. The impact could be significant, as 30 percent to 50 percent of transactions will need such stepped up authentication, up from 2 percent today.
As many as 25 percent to 30 percent of transactions may be declined, at least over the near term. Those surges in declines would come without a “roadmap” for SCA implementation, according to the issuers.
Today, there is limited support of 3D Secure, or 3DS, the latest version of the security protocol, noted the EPA. The responses indicate that 66 percent of those issuers surveyed see readiness in place by the end of this year.
In answer to the question as to whether too much friction is being introduced into the process, 8 percent of respondents strongly agreed, and another 50 percent agreed. In reference to the payments experience, 12 percent said there would be “significant declines,” while 62 percent saw a “slight decline.”
With detail on exemptions — a key point of discussion in a recent interview between Karen Webster and Ekata CEO Rob Eleveld, which also delved into the current state of unreadiness among issuers and merchants — 50 percent of issuers surveyed by the EPA said they will not be able to support all SCA exemptions this year.
Recommendations include the implementation of 3DS technology as soon as possible, according to the report, and ensuring that all payment terminals are chip and PIN compliant.