FCA Agrees To 18-Month SCA Implementation Timeframe

Strong Customer Authentication

The Financial Conduct Authority said Tuesday (Aug. 13) that it has agreed to a phased implementation of the Strong Customer Authentication (SCA) rules slated to start taking effect beginning next month.

The implementation will span an 18-month plan, and “The plan reflects the recent opinion of the European Banking Authority (EBA), which set out that more time was needed to implement SCA given the complexity of the requirements, a lack of preparedness and the potential for a significant impact on consumers,” the Financial Conduct Authority (FCA) said in a press release Tuesday.

As has been widely reported, SCA, part of the Payments Service Directive (PSD2 for short), mandates that banks and other firms must implement two-factor verification on eCommerce transactions above 30 euros.

The FCA said Tuesday that it will not take enforcement action against firms if they do not meet the relevant requirements for SCA beginning on Sept. 14 “in areas covered by the agreed plan, where there is evidence that they have taken the necessary steps to comply with the plan.”

At the end of the 18-month period, the FCA said, the agency expects all firms to have made the necessary changes and undertaken the required testing to apply SCA.

“The FCA has been working with the industry to put in place stronger means of ensuring that anyone seeking to make payments is not a fraudster,” FCA Executive Director for Supervision – Retail and Authorizations Jonathan Davidson said in a statement. “While these measures will reduce fraud, we want to make sure that they won’t cause material disruption to consumers themselves; so we have agreed a phased plan for their timely introduction.”

As had been noted in this space just days ago, the U.K.-based Emerging Payments Association (EPA) published a report on the impact of SCA on the payments experience. The report found that 75 percent of issuers said they would be ready by the Sept. 14 deadline. Yet this was compliance-ready, not operationally ready. Nearly three-fourths (74 percent) of issuers expect SCA to lead initially to a decline in user experience. Additionally, they see potentially 25 to 30 percent of transactions being declined in the short term unless a compliance timeline is agreed upon.



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.