What Is Secure Customer Authentication?

Secure or strong customer authentication (SCA) is one of the newest regulatory requirements aiming to add an extra layer of security. The authentication ensures contactless offline and online customer payments are secure.

Fraud has always been an issue when it comes to such transactions. Thankfully, because of the two-factor authentication, payment providers require to perform an additional check to confirm your identity.

This requirement has revolutionized the checkout flow; businesses and customers must adjust. Payments may be termed non-compliant and even declined when you can’t be identified using two factors.

What Is Required Under Strong Customer Authentication

In today’s world, online card payments are becoming the most common form of transaction. That’s why it’s important to have multi-factor authentication. A customer needs certain requirements at checkout to complete transactions and remain SCA compliant. The extra layer of security requires two of the following factors.

1. Inherence

This is something the customer is. You can use your fingerprints or face recognition as your extra layer of security. If you pick this, the payment service provider will ask you for fingerprints or face recognition before you can complete the process. Failure to provide what is required may lead to a failed transaction. Any other form of biometric can uniquely identify you.

2. Possession

SCA might also require something you have, like a mobile phone, hardware token or another device evidenced by a unique one-time passcode. European Banking Authority improved electronic payments a lot with these security requirements. It’s easier to identify yourself when the payment providers ask for something you possess.

3. Knowledge

Something you know, like a unique passphrase, PIN, or password, can also be part of the two-factor authentication. To ensure all your transactions are safe, you should avoid sharing your passwords or PIN with others. That way, no one can go behind your back and make unauthorized payments.

Transactions SCA Applies To

PIN and chip transactions already adhere to strong customer authentication. SCA will also apply to all contactless offline and online transactions that you initiate. That means that most bank transfers and card payments will need two-factor authentication.

Also, SCA requirements are needed if both the cardholder’s bank and the business are in the European Economic Area. However, there are a few exemptions when it comes to merchant-initiated transactions like recurring direct debits. When processing recurring transactions, you may complete them without SCA.

Other types of low-risk payments can also be exempted from the requirements. Your payment provider can request exemptions when processing a payment. The bank will then assess the level of risk involved and determine if SCA is still necessary.

To remain SCA compliant, a business should upgrade its payment terminal. That way, all transactions that require strong customer authentication will be easy to process. Besides eliminating fraud risks, an advanced payment terminal keeps sensitive data secure.

Drawbacks of Using Strong Customer Authentication

The only downside of using strong customer authentication requirements is the additional time during checkout. You will have to spend a few more seconds to complete your purchase by proving your identity.

Besides the extra time, SCA has plenty of benefits. You will have more confidence in using online services as a cardholder. SCA reduces the cost of processing fraudulent transactions. It’s also a great way of complying with international regulations.

How SCA Relates To PSD2

Secure customer authentication is a requirement for the second payment services directive (PSD2). PSD2 is the directive that provides payment standards for different industries in the European Economic Area. The multi-factor authentication is one of the most important mandates or implementations in PSD2.

SCA is a much-needed tool that guarantees customer identification before any transaction is completed. It’s based on the use of at least two elements that the customer had or knows. Since the SCA mandate, issuers or merchants in European Economic Area are validating all electronic payments.

So What Is Secure Customer Authentication?

Strong customer authentication was created to protect the integrity of different forms of payment, especially online. Fraudsters will have difficulty making false payments when they can’t provide SCA requirements.

Fewer people can get away with using a stolen credit card. You have to convince the issuing bank that you are the legitimate cardholder before they process payments. Learn all the SCA requirements to make your future transactions easier and more secure.