As merchants pushback, FCA extends SCA deadline by another 6 months

This is being done as it is felt that the payments industry is still not ready for the changes.  This change was supposed to have been implemented by September 14, 2019, but it has been dragging on for several months over the deadline.

The changes involve new rules by which every online purchase over EUR has to undergo a 2 step authentication and this implementation has suffered setbacks over the last couple of years and it is also not much preferred by merchant and payment providers as they struggle to get these changes implemented.

Apart from the technical challenges and cost involved in implementing these changes, a major issue that the merchants face is the loss of business.

Galit Michel, VP of payments at Forter, says: “Across the board, merchants are struggling to manage the significant changes to their payments process, and we have observed a lack of issuer readiness, as well as low levels of customer co-operation with the increase in friction at the checkout. The desired impact of PSD2 was to reduce levels of fraud, but in reality, the outcome has been to frustrate customers and deprive merchants of much-needed revenue.”

The transactions get dropped off due to various technical issues and the merchants are also seeing that many customers do not like to undergo this authentication process and hence the transactions get dropped off at the payment stage.

Across Europe where this change has already been implemented, merchants in France and Spain are seeing a drop of 25% in conversion rates, 30% reduction in Germany, and 40% reduction in transactions in Italy. When merchants are already suffering due to lack of demand during the pandemic period,this added burden is costing the merchants a lot of money and business. But the FCA seems adamant.

In a statement, the FCA says: “This further 6-month extension is to ensure minimal disruption to merchants and consumers, and recognises ongoing challenges facing the industry to be ready by the previous 14 September 2021 deadline. The new 14 March 2022 deadline is the latest we expect full SCA compliance for e-commerce transactions.

“We previously agreed to give firms extra time to implement SCA for card-based e-commerce transactions in response to concerns about industry readiness and to limit the impact on consumers and merchants. We also provided an additional 6-month extension in response to the coronavirus crisis.

“We welcome the implementation of SCA solutions which protect consumers while minimising the potential for disruption to customers and merchants. We still expect firms to continue to take robust action to reduce the risk of fraud.”

While critics blame the losses and dropped transactions on the new rule changes, supporters continue to believe that this is the best way forward to reduce payment fraud and this drop in transactions could actually constitute the majority of the fraud payments. But with the FCA determined to bring changes to protect consumers and retail clients, there seems to be little choice for merchants and customers.