Security & Fraud

How COVID-19 Complicates SCA Compliance For eCommerce Players Worldwide

How SCA And COVID Pressure eCommerce Players

The world of payments processing will be a very different place by the end of 2020 than it was at the beginning — one where securing transactions will take on a new priority for merchants and consumers alike.

That push is coming from two sources — one foreseeable, one not so much. The unforeseeable push is coming from the COVID-19 pandemic. The foreseeable changes stem from the already delayed strong customer authentication (SCA) regulations that are due to go into effect in Europe by the end of the year. Under the new SCA rules, merchants will need to be able to securely authenticate every customer before authorizing eCommerce transactions.

As Kount Executive Gary Sevounts noted in a recent conversation, this combination has left payments players worldwide trapped between two sources of pressure: They’re responding to a global pandemic and the attendant increase in fraud, while at the same time preparing for a major regulatory change.

It’s in this context that Kount and Barclaycard are announcing a new partnership that will see Kount’s fraud prevention tools embedded within the Barclays Transact suite of tools. Barclays Transact aims to help merchants make online transactions simpler, safer and compliant with the upcoming SCA regulations.

The partnership, Sevounts said, grew out of Kount’s ongoing interest in building partnerships with payment service providers around the world. Firms like Braintree, Chase, Moneris and BlueSnap are already leveraging Kount’s fraud prevention tools.

For Barclays, the objective was to offer customers an integrated fraud-fighting experience built directly into their payments platform. The system is designed to knock back chargebacks, decrease false positives and manual reviews while keeping customers fully compliant with SCA regulations. The system is also built to massively scale, as Barclaycard processes almost 40 percent of all U.K. card transactions.

“They looked at quite a few other vendors, and they selected Kount because of the capability of our Identity Trust Global Network paired with our AI and machine learning,” Sevounts said.

It is a piece of preparation that everyone in the digital ecosystem will need going forward, he noted, as players face the dual challenges of turning up security protections while alos enhancing the consumer experience.

The Experience Is Everything

SCA regulations have a tendency to create transaction bottlenecks by forcing a pause in the process to establish that a customer really is who he or she claims to be.

The goal for Kount, Sevounts noted, is to combine large data sets about worldwide transactions with artificial intelligence (AI) and machine learning (ML) to quickly and accurately figure out if the customer is a frequent shopper, a VIP customer, a fraudster or something in between. The ability to instantly separate the good guys from the bad guys is a huge boon, because it allows merchants to push forward a VIP transaction while quickly and seamlessly bouncing a fraudster.

“And then for ‘anything in between,’ if the trust is low, the merchant can step up authentication to a certain degree and know they are justified, as they aren’t throwing this at their most trusted customers,” Sevounts noted. “That significantly reduces, or in many cases eliminates, the friction, with a solution that emphasizes the customer experience beyond merely fighting off fraudsters.”

Barclays Transact with Kount also allows merchants to more effectively leverage the SCA’s so-called “transaction risk analysis exemption” (TRA), which allows low-value/low-risk transactions to push through the system without full consumer authentication.

Sevounts notes that in the world of low-risk, low-price transactions, the “cure” of preventing fraud can often be worse than the “disease” in terms of scaring off good customers.

“Delay their decision and the abandonment rate goes up alongside the dissatisfaction rate, and it's harder to deliver that customized experience,” he said. “It definitely creates a bottleneck in commerce, [but] one that can easily be broken.”

The goal is to keep the transactions moving forward and only adding friction when necessary, not as a matter of course.

The Path Ahead

For payment providers the world over, fighting fraud and authenticating consumers has taken priority for weeks because of the massive uptick in COVID-19-related scams. As consumers headed online en masse, the fraudsters surely followed, Sevounts said.

“Merchants are now facing a myriad of those new variables that a lot of online businesses were not exposed to before,” he noted.

And that highlights the importance of having a partner in digital security, Sevounts added. Whether businesses choose to work with Kount, he said that what’s most important is to build a fraud-fighting focus from the ground up — both to fend off current threats and also to prepare for the next generation of requirements.

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