Why Strong Customer Authentication (SCA) is An Essential Aspect of Fraud Prevention
Strong Customer Authentication adds an additional layer of security to online payments. In this article, learn about the benefits that SCA can offer your business.
Card-not-present (CNP) fraud is on the rise. In 2020, CNP fraud cost companies an estimated $35.5B globally, and that number is only projected to grow as more consumers shift to online channels to purchase products.
As a result, business owners need to integrate as much security as possible into their online payment platforms. One of the most important methods to prioritize is strong customer authentication (SCA).
Here's what you can expect to learn in this article:
- The definition of strong customer authentication
- Why SCA is important for preventing fraudulent transactions
What Is Strong Customer Authentication?
For those who are unaware, Strong Customer Authentication (SCA) is a new regulatory requirement of the second Payment Services Directive (PSD2) for online European Economic Area (EEA) and UK businesses that aims to help reduce fraud. It also strives to reduce the risk associated with offline contactless payments.
As the name suggests, strong customer authentication is much more robust than conventional authentication practices. This means that you typically need to include at least two of the following:
- An attribute of the customer themselves (such as facial or fingerprint recognition)
- Information sent to a device that the customer owns (such as a temporary code)
- Information that the customer knows (such as a PIN number or password)
With the enforcement of these regulations, banks and online merchants will be required to deny transactions that do not sufficiently meet these criteria.
Why Is It Important for Online Merchants?
SCA adds an additional layer of security to online purchases.
Some merchants have begun to worry that it requires too much information from their buyers. Others are concerned that customers won’t want to spend the time providing this information.
In reality, the benefits heavily outweigh the drawbacks.
It’s important to note, though, that certain transactions are exempt from these requirements. These include:
- Recurring subscriptions
- Low-risk transactions
- Low-value transactions
- Corporate transactions
These are essential to keep in mind. Although they may not adhere to SCA obligations, fraudulent behavior could still occur. Using SCA in combination with a fraud prevention solution like Vesta's Payment Guarantee can add even more protection with minimal friction. Our advanced machine learning platform allows merchants to quickly detect suspicious behavior and minimize the chances of fraud occurring through adaptive friction. Over time, this can save your business thousands in chargeback remediation expenses while keeping your payment process smooth and approving more legitimate transactions.
It can also help you determine the risk of a particular payment. In practice, you can streamline low-risk transactions and prevent any interruptions in the payment process.
From here, you can take advantage of increased security without impacting your bottom line.
Using Strong Customer Authentication Is Crucial
Otherwise, you won’t be as protected as you should against fraud attacks. This could easily result in damage to your business's reputation and heightened expenses related to chargeback fraud.
Strong customer authentication will help ensure that you're able to stop fraudsters before they can inflict serious damage on your business. If you're interested in learning more about how Vesta's advanced patented machine learning platform can help improve your fraud prevention program and help with compliance with SCA and PSD2 directive request a demo of our platform today.