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A Guide to Strong Customer Authentication (SCA) in 2024

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As a UK business owner, you’ll know providing secure e-commerce transactions is a big deal. Staying ahead of online payment regulations and data security, particularly Strong Customer Authentication (SCA), is top of the list. 

It’s simple enough: SCA provides secure authentication layers for payment processing, and you have likely used them before as a business owner or consumer. Introduced under the second Payment Services Directive (PSD2), SCA provides enhanced payment security with advanced customer validation. Since March 14, 2022, all online payments in the European Economic Area (EEA), Monaco, and the UK must use additional layers of Strong Customer Authentication when processing online payments to verify the identity of their customers and prevent fraud.

Let’s explore how your business can stay compliant by following SCA measures. In this article, I will uncover:

  • What Strong Customer Authentication is and why it’s important
  • Who SCA is aimed at, and when it’s required
  • The benefits of secure customer verification for businesses
  • How to get started with SCA

What is Strong Customer Authentication?

SCA introduces additional layers of customer authentication when making online transactions. Doing so means every transaction within the regions it covers meets authentication standards and avoids fraud. The customer’s identity is verified using at least two factors from three categories:

  • Something they know: password, PIN, or other personal information only the customer knows.
  • Something they own: personal smartphone, tablet, or other device used for the transaction.
  • Something they are: unique biometric data like facial recognition or fingerprint scanning.

By combining various personal details and devices, SCA strengthens the authentication process, making it harder for fraudsters to make unauthorised payments.

When is SCA required?

SCA applies to all EEA, Monaco, and the UK online payments. It applies to all types of credit and debit card transactions and some alternative methods, like digital wallets. However, some transactions don’t require SCA. These may include:

  • Low-risk transactions
  • Low-value transactions under £25
  • Trusted beneficiaries – customers can whitelist trusted businesses to avoid SCA checks
  • Recurring, fixed-amount transactions are exempt from the second transaction onwards
  • Payments initiated by the merchant skip SCA after the initial authentication
  • MOTO (Mail Order and Telephone) transactions
  • Payments involving non-European businesses or customers

What are the benefits of SCA?

Strong Customer Authentication (SCA) brings many benefits to merchants. Numero uno, of course, is enhanced payment security. Strengthening the authentication process makes it more challenging for fraudsters to steal money. This helps your business to reduce the risk of chargebacks, fraudulent transactions, and the charges they bring. Furthermore, reducing the risk of fraudulent transactions leads to higher payment authorisation rates and improved cash flow. 

Adding SCA shows a commitment to customer protection and data security, increasing your brand reputation for more trust, better loyalty and return visits. In a similar boat, SCA can increase the customer experience. Multiple authentication options and transparent communication can help maintain a positive and reassuring user experience.

strong customer authentication for secure online payments

How to implement SCA in your business

Imagine combining a fingerprint or a one-time authentication code sent to a smartphone to log in – that’s what SCA does. Despite adding extra steps at checkout, SCA provides a variety of plus points, making the customer feel safer and reducing drop-offs.

Utilising SCA can vary based on the payment method. 3D Secure is a common choice for credit and debit cards, providing an additional layer of authentication. Digital wallets may offer SCA steps tailored to specific regions or markets.

Work with your payment service provider (PSP) or card acquirer to align your business with SCA requirements to get started. If you’re using a payment gateway, it’s probably already built into checkout, but make sure you’re clued up and compliant. A good payment provider should always be on hand to help you!

Once you’ve got multi-factor authentication in place, communicate with your customers. It may help reassure those who aren’t as confident making online transactions. You could also boost customer experience by explaining to regular customers that they can whitelist your business after the first SCA check or use recurring payments. 

SCA and two-factor authentication work beyond payments, too. We secure logins to the Atoa app and dashboard with a unique passcode sent to your smartphone, meaning access and payments are protected.

Stay compliant with Strong Customer Authentication

Remember, PSD2 SCA regulations are targeted at banks, not merchants. Non-compliant transactions approved by issuing banks violate local laws. As a business owner, your main risk is the bank’s potential refusal of transactions, resulting in lower authorisation rates. This is best avoided, as it can impact your cash flow and customer experience. 

Make sure you stay up to date with any news and developments around SCA and PSD3, as these requirements may change over time.

Frequently asked questions

What is Strong Customer Authentication?

SCA aims to enhance online payment security by requiring additional authentication factors, making transactions within the EEA, Monaco, and the UK more secure.

How do I know if my transactions require SCA?

Your payment service provider or card acquirer should provide clear guidance on which transactions require SCA and which don’t. 

How can I benefit from SCA as a business owner?

While SCA adds an extra layer of complexity, it provides a variety of authentication methods, potentially reducing drop-offs and improving overall transaction security.

How can I make SCA easy for my customers?

Communicate clearly with your customers about the authentication process and provide multiple options to complete it. Offer alternative methods that don’t require authentication, such as trusted beneficiaries or recurring payment schemes.

The takeaway

UK businesses can enhance online payment security to reduce fraud risks by understanding SCA requirements and providing secure authentication for customers. But the benefits don’t stop there; customers feel safer and are less prone to cybersecurity issues or scammers.

SCA is good for business. It enhances payment security and brings many benefits, including reduced fraud costs, increased payment authorisation rates, and compliance coverage. Customers aren’t overlooked either, with strong customer trust, a boost in brand reputation, and improved customer experience are just a few things up for grabs.

Want to know more? Then keep reading! We love this SCA article by Adyen.

How Atoa can help 

We’re an instant bank app providing secure transactions to businesses of all sizes. SCA is high on our list, with each of our transactions made in the customer’s bank app using their unique biometric security. That means zero chance of chargebacks. Plus, Atoa is free from hidden charges, scary gotcha contracts and compliance fees. 

Download Atoa Business, an open banking powered app

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