When the SCA regulations were introduced, they were intended to reduce ecommerce fraud. However, the two-factor authentication process has also made it more difficult for customers to complete transactions, which can lead to cart abandonment and lost revenue for merchants.
Merchants are working to comply with the SCA regulations and make the payment process as smooth as possible for customers. However, many customers are still unaware of the new regulations, which can lead to cart abandonment and lost revenue for merchants.
To be able to thoroughly evaluate consumer awareness of SCA and their state on it, Signifyd ecommerce fraud protection experts, conducted a survey of 2,000 consumers. One survey for each country involving the UK, Italy and France. Signifyd had collaborate with OnePoll, and presented the results in an ebook.
They explored why consumer awareness of SCA regulations are crucial and what merchants moving forward should implement to mitigate these issues.
How does SCA affect customers?
Due to the rising fraud pressures caused by the boom in ecommerce sales, new payment regulations have been implemented across Europe and the UK. The Payment Service Directive 2 (PSD2) mandates Strong Customer Authentication (SCA), which aims to ensure the legitimacy of online orders, maintain customers’ trust in online purchases, and sustain the growth of the ecommerce economy.
Customers must provide two forms of authentication to verify their identity during online checkout. They are able to select two out of three independent authentication factors, including:
- Information the only the customer would know (password, pin, secret answer)
- Asset the customer has to make purchase (mobile device or token)
- Personal verification (fingertip, face or voice recognition)
Strong Customer Authentication (SCA) is required for all eligible ecommerce transactions within the European Economic Area (EEA).
The awareness of SCA in consumers
Despite the recent implementation of SCA in Europe and the UK, consumer awareness of the new regulation remains low. According to a survey by Signifyd, only 53% of UK respondents and less than a third of respondents in Italy and France are aware of SCA.
As expected, younger consumers are more aware of SCA than older consumers, with those aged 25-34 having the highest awareness in all three countries. Unlike France and Italy, the UK is not seeing a significant difference in awareness between different age groups.
Liable bodies for customers’ lack of awareness of SCA?
Banks and card issuers are responsible for informing customers about SCA, but nearly half of survey respondents have not received such information.
Even after receiving information about SCA, 16% of UK respondents have not read it, with respondents in Italy and France being even less likely to read SCA communication.
Banks, card issuers, and merchants can collaborate to develop more effective communication strategies to increase consumer awareness of payment changes.
Merchants can also increase consumer awareness of SCA by disseminating information about upcoming changes and using their websites and social media to highlight the new authentication process. This can help to instill trust in the process and reduce cart abandonment.
What’s the risk of customers’ lack of awareness of SCA?
Ecommerce customers demand a fast and efficient shopping experience. A single negative review or a poorly designed website can send them away. In the UK, 80% of mobile orders were abandoned in the second quarter of 2022. This is compared to 74% of orders placed on tablets and 72% of orders placed on computers.
Cart abandonment rates are high, and friction in the checkout process can be costly for merchants, especially if customers are not aware of SCA and its benefits. Signifyd’s survey found that 33% of UK respondents have decided against shopping with a particular retailer after being asked to complete additional verification steps.
Friction in the checkout process can lead to lost customer loyalty, as UK shoppers say it takes only 2.6 negative shopping experiences for them to abandon a retailer. Additionally, 68% of UK online shoppers are likely or very likely to switch to a larger retailer if they have a bad experience with a smaller company.
SCA regulations provide a framework for better ecommerce fraud protection. Merchants are working to implement the new process, improve customer retention, and rethink the checkout experience. However, many online shoppers are unaware of the changes.
By collaborating with banks and card issuers, merchants can increase awareness of SCA and its benefits, which can reduce cart abandonment and boost revenue.