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July 7, 2022

Payment declines rise but blaming SCA rules is no excuse

Three months on from the introduction of Strong Customer Authentication, the UK payments sector reports a major rise in payment declines

By Douglas Blakey

Well, who did not see this coming? Three months on from the introduction of Strong Customer Authentication (SCA) in the UK, the payments sector reports a major rise in consumers unable to complete an online transaction owing to the new regulations.

It is hard to voice much sympathy here as the deadline for implementing SCA was extended on a couple of occasions. In addition, the FCA could not have done much more to encourage e-commerce merchants to work with card issuers to implement SCA. It was surely well understood that if an e-commerce transaction did not meet the SCA requirements, it could be declined by the card issuer/bank. Moreover, it was self-evident that a high number of declined transactions would increase costs and complaints, reduce customer confidence and lead to possible reputational damage (as well as the FCA fines).

There was also a concerted publicity campaign from the vendor community, urging merchants to ensure that they got the technology right as well as their choice of service provider. At the same time, tech partners such as GoCardless flagged up the inadvisability of just adding inconvenient bolt-ons to compensate for the fact that cards were not designed for an era prior to online transactions.

Signifyd, Nuapay survey findings come as little surprise

Sadly, it comes as little surprise to note the findings of two reports that almost dead-heat in hitting the inbox. A survey commissioned by Signifyd along with two companion polls in France and Italy point to a rocky start for SCA and reflect significant differences across Europe when it comes to having prepared for the regulation.

In the UK, some 36% of consumers have been unable to complete an online transaction in the past three months-the blame being laid at the door of the new SCA regulations. At the same time, 73% said they would stop shopping with a retailer if they encountered a bad online experience with 33% of UK consumers reporting they had already abandoned merchants due to a negative online experience.

In Italy, Signifyd transaction data shows that nearly a quarter of orders subject to SCA are declined in part due to outdated technology. Furthermore, 42% of approved orders encounter significant friction caused by banks relying on the original 3D Secure version.

In the UK, only 15% of SCA orders are declined and only 16% of approved orders are processed by the old technology. And France is doing even better with 12% of orders declined and only 2.5% of approved orders being subject to outdated 3D Secure technology.

Meantime, a report from Nuapay, EML Payments Limited’s Open Banking business, reveals that UK businesses have seen payment decline rates increase by an average of 37% following the enforcement of SCA rules on 14 March. The UK numbers are too high but do provide a further nude to technology providers to flag-up the potential of open banking payments as an alternative to traditional cards.

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