To prevent fraud even more effectively, the EU introduced a new regulation, which obliges companies to integrate even stricter authentication procedures in their payment processes. This regulation on what is known as ‘strong customer authentication’ (SCA) supplements PSD2.
The most important component of SCA is the two-factor authentication using two of the following security components.
Something the customer knows:
password, PIN, or security answer
Something the customer owns:
a mobile phone, hardware token, etc.
Something the customer is:
biometrics such as fingerprint or face scan
Each of these elements must be independent of each other, so that the security of the others is not compromised in the event of a security breach. SCA as a whole must be designed logically in such a way that the confidentiality of the authentication data can be guaranteed at all times.
According to the SCA regulation, some types of transactions can be exempted from strong customer authentication. In certain exceptional cases, it is at the discretion of the merchants, issuers and acquirers whether SCA is required from the consumer or not.
With all exemptions, the respective authentication process remains invisible for the user: Transactions are carried out like transactions without 3D Secure, thereby guaranteeing a smooth customer experience.
Transactions outside the scope of SCA:
Thanks to RBA, the number of cart abandonments can be significantly reduced.
To continue to offer customers a smooth payment process for most transactions despite stricter security requirements, a method known as risk-based authentication can be used. It can be applied to transactions of between €30 and €500 that have been classified as low-risk. Thanks to RBA, customers can be spared additional authentication. Should a transaction be classified as suspicious, customers can be actively requested to undergo additional authentication. The more transaction data is made available, the easier it is to assess the risks.
Benefits of RBA