We are living in a digital world where everything is handled digitally. With the inclusion of eCommerce scenarios, people are making digital payments that need to be authorized in order to maintain transparency. When customers make payment to the merchant, the merchant needs to authorize the transaction. Strong customer authentication is a standard requirement of Revised Directive on Payment Services (PSD2) for all the payment providers in the European Economic Area. This particular requirement ensures all the electronic payments are filtered through multi-factor authentication to enhance the security of payments. Strong customer authentication solutions are also used to improve the customer experience as well because it helps in providing a sense of credibility for the merchant.
Every electronic payment provider needs to follow SCA under PSD2. It is the second version of the Payment Services Directive, which was introduced as the first European Union directive.
What is Strong Customer Authentication?
Strong Customer Authentication uses two or more authentications that determine the authenticity of the data. There are plenty of companies that can provide real-time PSD2 decision engine to strengthen strong customer authentication. Digital scams and fraudulent transactions are increasing in the digital environment.
European Central Bank stated that yearly online fraud accumulates to 1.3 billion Euros. This further triggered to develop a stringent regulation to curb the density of the scam. Around 77% of digital merchants are currently facing online payment scams that hamper their credibility. Strong Customer Authentication is directed to customer-initiated online transactions, and it covers all the digital payment and bank transfers. The main aim of strong customer authentication is to provide better authentication during the checkout procedure during the online payment. Merchants need to deploy stringent strong customer authentication that can help in detecting the payment scams.
What Are The Elements of Strong Customer Authentication?
The strong customer authentication process includes the following attributes-:
Knowledge: It is essential to avail of all the necessary details that will help in determining the authenticity of the customer. This particular element is related to all the information that the user knows. For instance, the PIN, passwords, secret key, etc. that helps in accessing the account. Knowledge is essential to reach to the user account.
Possession: Once the knowledge phase is complete, the next phase is the possession that includes acquiring something that customers used to make the transaction. For instance, token, smart card, smartphone, etc. It will further develop the process in the right direction.
Inherence: Some data is exclusive to the customer that will help in authenticating their identity. This generally includes face biometrics, fingerprints, voice patterns, etc.
It is essential to follow all the elements properly in order to reach a conclusion. The lack of proper usage of the authentication can result in increasing the density of the fraud. It is essential for the organization to deploy strong customer authentication that diligently follows the elements.
What Are The Benefits of Strong Customer Authentication?
So far, you must have realized the prominence of SCA in the digital environment. The global merchant business faces a wide range of challenges related to payments, and SCA has created a great way to authenticate and detect the fraud transaction. Here are a few benefited from strong customer authentication-:
● It helps in reducing the damage created by fraudulent transactions as it indicates the merchant beforehand regarding the occurrence of false transactions.
● SCA secures all the digital payment services of the merchant so that everything is covered and under control.
● Reports have proven that a company that deploys stringent SCA practice has found a reduction of scams and frauds in their online payments.
● It is important for all businesses with European Economic Area to comply with PSD2, and strong customer authentication diligently follows the PSD2 for its authentication.
● Not only benefitting the merchant, but strong customer authentication increases the confidence in customers/cardholders as well while making an online payment.
In a nutshell, strong customer authentication is the need of the hour to ensure the transparency in the digital payment and make the best use of the electronic payment modes.
The Bottom Line
Digitalization has been both boon and bane for the world. While it revolutionized the way we transacted, it created a whole new avenue for the scammers. There are plenty of concerns related to online payments that both customers and merchants need to know about. With strong customer authentication services using PSD2, merchants can ensure whether a transaction is genuine or not. Strong customer authentication paves the way for better transaction authentication from the customers’ side and detects any chances of fraudulent payment. It is true that merchants are facing payment scams on their portal, which results in severe consequences. Hence, it is essential to understand the need for strong customer authentication and avail the right services.