The migration to digital everything — aka the Digital Shift or Digital 3.0 if you prefer — is fulfilling the promise of eCommerce for the good players, as well as the bad actors. Payments regulations are meant to shield consumers from the worst of it, and businesses need to do their part by embracing identity verification engineered for digital-first commerce.
PYMNTS’ new Merchants Guide To Navigating Global Payments Regulations, done in collaboration with Ekata, delves into the issues surrounding compliance with strong consumer authentication (SCA) and how that is affecting the adoption of digital finance especially.
While these matters may appear to be settled law in markets like the European Union and the U.K., where the General Data Protection Regulation (GDPR) and the revised Payment Services Directive (PSD2) originated, “Even regulators in countries where open banking rules are set have major decisions to make about online privacy and data security standards,” the Guide states.
“Questions remain about the implementation of Strong Customer Authentication (SCA) and how well it can regulate online authentication and identity measures, for example. Answers are essential not only to ensure open banking can continue to develop, but also to convince consumers and merchants to trust these systems enough to make active use of them.”
U.S. Markets Prep For SCA, PSD2 Compliance
As Q2 earnings reports pour in from businesses that did well under pandemic lockdowns — mobile order-ahead platforms and restaurants among them — it’s important to remember that embedded in those positive financials is more than a little extra fraud.
“The number of active phishing sites in the U.S. jumped from 149,000 in January to more than 500,000 by the middle of March, according to one report. Similar statistics can be seen in the U.K., where another report noted that approximately one in three U.K. residents have been targeted by bad actors with COVID-19-related schemes. Distinguishing legitimate online customers from illegitimate ones is a primary challenge for regulators, but it is critical to make these judgments quickly and accurately,” according to the new Merchants Guide To Navigating Global Payments Regulations.
Regulators are assessing rapidly unfolding post-pandemic developments like the increased fraud threat, and, as SCA rules cross the Atlantic and become enshrined in U.S. law, merchants and their technology partners will need powerful solutions for better authentication.
“The U.K. has pushed its deadline for SCA implementation to Sept. 14, 2021, trailing behind the Dec. 31, 2020, deadline for EU merchants as both markets contemplate pandemic-induced changes to the financial industry. U.S. Senate members proposed an online privacy bill in May that is still making the regulatory rounds as well,” the new Guide states.
“These initial moves show that regulators are taking the shifts to online shopping and online privacy threats seriously, but they also show that more work is needed. U.S. lawmakers have yet to decide on passing the May bill, for example, and U.K. banks and merchants still have lingering questions on exactly how SCA requirements will work and if they will truly protect against the fraud that is steadily growing in their online channels.”
‘Paramount To Growth’
Consumers were spending between 10 percent and 30 percent more online than they did prior to the pandemic. On that wave rides a great many eCommerce hopes and dreams for the world after COVID-19. It’s also attracting cybercrooks like flies. That’s where work remains to be done.
“Regulators and financial industry players therefore have both a challenge and an opportunity ahead of them when it comes to open banking and privacy rules,” according to the new Merchants Guide To Navigating Global Payments Regulations.
“It is clear that online payments will come to represent a larger share of consumer and merchant transactions over the coming years, and it is equally apparent that online privacy is paramount to that growth. How regulators respond to ensure merchants and consumers can transact quickly and easily on these channels is thus crucial to the future of open banking.”