Is GoCardless SCA compliant?

Is GoCardless SCA compliant?

GoCardless is fully PSD2 compliant. SCA does not apply to payments through GoCardless. Our customers will not need to implement any additional authorisation methods for payments collected using GoCardless as a result of SCA.

GoCardless uses ‘paperless’ Direct Debit mandates, which are out of scope of SCA.

The EBA has also confirmed that ‘paperless’ Direct Debit mandates will not require SCA on any payment collection, including any initial payment.

Specifically, the EBA confirmed:

“Mandates given by the payer to the payee set up without the direct involvement of the end customer’s PSP are not subject to SCA.”

Paperless Direct Debits do not directly involve the end customer’s PSP upon setup.

The above confirmation is important to note. Unlike the 'paperless' Direct Debit mandates used by GoCardless, recurring card transactions and 'e-mandates' will require SCA for any initial payment if there is direct involvement from the end customer’s PSP upon setup.

Additional protection with the Direct Debit Guarantee

Though not directly related to SCA, it’s important to note that the Direct Debit guarantee and indemnity claim protections offered by the Bacs and SEPA Direct Debit payment schemes (and similar protections typically offered for Direct Debit schemes) greatly reduce the risk of payment fraud or other abuses impacting the end customer.

Each offers protection for customers, in that customers are entitled to reverse a payment taken fraudulently or in error, after it has been debited from their bank account.

What do GoCardless customers need to do in preparation for SCA?

For payments collected using GoCardless, no action is needed before or after SCA comes into force, because ‘paperless’ Direct Debit mandates are not subject to SCA.

However, if GoCardless is only one part of your payment mix, you should consult your other PSPs to see what changes will be required to prepare your other payment methods for SCA requirements.

To find out more about how GoCardless can help your business get ready for life after SCA, talk to one of our payment specialists.

Using GoCardless to build a competitive advantage for SCA

There are several tactics businesses can use to minimise the impact of SCA and protect their conversion rates and revenue. This includes leveraging exemptions and investing in a product like 3DS2 that minimises the friction of two-factor authentication, although these do not completely remove the risk of conversion drop off.

Since payments through GoCardless are out of scope of SCA and fully PSD2 compliant, using GoCardless means you can avoid any potential conversion hit that comes with SCA implementation.

But how else can GoCardless help your business build a competitive advantage post SCA?

Detecting fraud with GoCardless payment intelligence

Direct Debit is a low risk payment method with much lower chargeback rates than cards. We are continuously working to enhance security even further – for example, we are developing a product that will help our customers to detect (and counter) fraud attempts more easily, by applying payment intelligence learned from millions of transactions in our network of more than 70,000 merchants.

This can be compared to what’s called Transaction Risk Analysis in the SCA world, where a merchant is allowed to forego SCA requirements if their payment provider’s fraud rate is below a certain threshold.

With this new functionality, GoCardless will analyse every transaction and help merchants spot and stop fraud attempts, without impacting conversion.

The customer preference for Direct Debit

As well as being PSD2 compliant, GoCardless is the preferred payment method for numerous types of recurring payments across Europe.

In a recent YouGov survey of around 12,000 consumers, bank debit/Direct Debit was found to be the most popular payment method in all four purchase types (online subscriptions, instalments, household bills and traditional subscriptions) in all six European markets surveyed (UK, France, Spain, Germany, Denmark and Sweden), plus a number of other international markets.

Additionally, in a GoCardless survey to 4,000 consumers in the UK, France, Spain and Germany, 52% said they were likely or very likely to pay for a subscription by Direct Debit if it meant a smoother checkout.

What is GoCardless?

GoCardless provides a smarter way to take recurring payments from your customers around the globe, eliminating involuntary churn and reducing cost. We already help more than 70,000 businesses get paid on time.

To find out more about how GoCardless can help your business, talk to one of our experts.