The potential business impact of SCA

How will SCA affect online businesses and the wider European economy?


While more businesses are starting to wake up to the impending SCA legislation taking effect in September, many are still considering what the potential effects of SCA will be. Here are four potential impacts of SCA.

Conversion rate drop off

For transactions that require authentication, the new legislation means additional steps during the checkout flow. Friction during checkout can greatly increase the likelihood of a potential end customer not completing a purchase. 69% of purchases were abandoned in 2019 and 27% of those who did abandon a purchase did so because the process was ‘too long or complicated’.

While there are exemptions available for certain types of transactions and other general tactics that business can implement to reduce checkout friction, SCA will likely result in reduced conversion rates for businesses unable to balance the new security measures with a convenient checkout experience for end customers.

In India, similar legislation saw an ‘overnight’ conversion rate drop of 25% across all affected businesses.

The economic impact of SCA

The result of fewer end customers completing purchases due to the new authentication process is expected to have a knock-on effect on the European economy. European businesses stand to lose an estimated €57 billion in the first year after SCA implementation.

End customer reimbursements

According to the European Payments Council: “PSD2 foresees that the payer can claim full reimbursement from their PSP in case of an unauthorised payment if there was no SCA measure in place and if the payer did not act fraudulently.”

In practice, this means that where a merchant’s PSP (e.g. a card acquirer) chooses to either rely on an exemption (to not apply SCA) or does not implement SCA at all, they will be liable for any resulting fraud. Where SCA is applied, that liability can be shifted to the party applying SCA - that is, the payer’s PSP (e.g. the card issuer). Where a merchant forces its PSP (e.g. a card acquirer) to apply a specific exemption, there is nothing preventing the PSP and merchant agreeing where liability ultimately sits, and we expect that liability to be passed to the merchant themselves.

Card networks such as Visa have been hard at work updating their rules to reflect these liability provisions.

Demand on resources

In the short term, becoming SCA compliant will require product, legal, operations and finance teams in affected businesses to help implement changes. If merchants choose to communicate changes to end customers (more on that below), it will also require marketing effort for messaging to resonate in the best possible way.

71% of businesses believe the resource burden for implementing SCA is ‘significant’.

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