Belgium and Netherlands introduce SCA early

SCA goes into affect early across some European countries.

The PSD2 requirement for Strong Customer Authentication (SCA) comes into full effect from 1^st January 2021.

All EEA merchants will be required to use an SCA to provide Identity Checks on cardholders and protect eCommerce transaction. SCA will greatly reduce fraud and improve approval rates, bringing long-sought security for online payment.

Many of our clients have been using 3DSecure 2 for many months with excellent results and there is a clear and significant reduction in friction over the older 3DSecure 1.0.2. Subscription payments are also working very well, this is an area that has received special attention in Version 2.

While European regulators are all working to an agreed timeline, implementation schedules do differ among regulators. As part of a phased-in approach, some European regulators have applied SCA ahead of schedule (see the table below), and issuers in these countries may start declining transactions and requesting authentication (Soft Decline).

All Financial Regulators across the EEA have published their road maps; links to some of these are provided below.

• Belgium: https://www.nbb.be/doc/cp/eng/2020/belgian_roadmap_sca.pdf
• Denmark: https://www.finanstilsynet.dk/Nyheder-og-Presse/Pressemeddelelser/2019/Kundeautentifikation
• France: https://www.banque-france.fr/sites/default/files/medias/documents/2019-10-30_-_osmp_-_plan_de_migration_dsp2.pdf
• Netherlands: https://www.betaalvereniging.nl/en/focus/roll-out-sca-remote-cards-payments/sca-migration-project
• UK: https://www.ukfinance.org.uk/news-and-insight/blogs/ensuring-uk-sca-compliance-minimising-customer-impact

What emerges from these road maps is that some countries are extending their grace period even further than January 1^st, with countries such as the UK extending to April 2021 and possibly beyond.

However while these extensions may relief domestic pressures from businesses already struggling with the effects of the pandemic, no one regulator can influence cross border SCA, which is not very helpful when dealing with eCommerce.

This simply means that SCA must be addressed without further delays and while SCA may require payment processes to be re-engineered, SCA is delivering on its promise to uplift approvals, reduce friction, lower costs and false positives and in general greatly benefit online commerce.

How does this impact your business?

The only sensible action for Merchants is to have SCA implemented into their processing platform before January 2021 to avoid losing transactions to soft declines. By starting early, Merchants will also gain valuable experience with SCA Exemptions and Friction-less Authentication and learn how to fine tune their data and 3D Secure operations for maximum business benefits and consumer satisfaction.

The older Version 1.0.2 will be available throughout this period and merchants can easily fall back to this sturdy and well established protocol at any time, giving further resilience to processing. Endeavour 3D Secure provides the tools to have both available.

And yes, there is a financial incentive

From 31 December 2020, MasterCard is introducing additional fees relating to SCA & 3D Secure. These new fees apply only to for EEA (costs in Euros):

• 2c per each transaction in which the exemption is sent with the authorization (no fee is applied to the exemption if it is sent on a 3D Secure 2 transaction)
• 4c per transaction sent using 3D Secure 1.

All other fees remain unchanged.

These fees are clearly being introduced to incentivize migration from V1 to V2. Version 2 is the bedrock of payments for the next decade. The schemes are monitoring Issuers closely to ensure that Exemptions and MIT are properly observed and to keep challenges to the minimum. The goal for Version 2 is to bring approval rates on par to card-present payments, remove reasons for cardholders to abandoned a transaction and promoted the right balance of security and convenience for cardholders.