Payments fraud in general is projected to spike from $32.4 billion in losses in 2020 to $40.6 billion by 2027, with different forms seeing different levels of growth. Reports of credit card fraud increased from 17,236 in the first quarter of 2015 to 45,120 during the same quarter last year, for example.
This fraud growth has led some oversight authorities to enact more stringent security protocols, with the European Union implementing strong customer authentication (SCA) requirements under the revised Payment Services Directive (PSD2) to ensure that all merchants are on the same page. The multifactor authentication (MFA) mandates outlined under SCA can take many forms, ranging from simple password entry to more advanced biometric systems, but many merchants have reported customer friction as a result of its implementation.
In the April Authenticated Payments Report, PYMNTS explores the latest in the world of payments authentication, including how SCA is affecting the retail market, how biometrics are keeping fraudsters on their toes and why delegated authentication is growing more popular as a means of offering merchants more control over SCA compliance.
Biometrics are witnessing a surge in popularity after the EU’s SCA requirement went into effect earlier this year. Experts predict that biometric tools will be used to verify more than 18 billion transactions this year, representing a total payments value of more than $210 billion. Customers appear to be largely pleased with the greater implementation of such methods, as 76 percent say they would like to see stricter security measures like biometrics when it comes to payments authentication.
Some businesses and customers have experienced challenges due to the implementation of SCA, however. Research reveals that 46 percent of United Kingdom customers are at least “somewhat” likely to give up on transactions that require MFA because they are frustrated with the checkout experience. Other European markets have witnessed abandonment rates of more than 25 percent for such transactions, compared to those in the single digits before SCA was enforced. This means that merchants and their payment providers must do more to comply with these new requirements without offering friction-laden experiences that drive off customers.
Despite merchants’ struggles, SCA measures have had a quantifiable effect on fraud prevention. Biometric authentication methods have proved particularly promising, as they force fraudsters to undergo exceedingly difficult tasks like spoofing facial recognition or fingerprint scans — meaning they could be key to stopping up to $43 billion in identity fraud losses. Traditional identity fraud could still be a factor, however, with $13 billion in losses being attributed to such schemes last year.
For more on these and other payments authentication news items, download this month’s Tracker.
How Delegated Authentication Can Help Merchants Meet PSD2’s SCA Requirements
The EU’s SCA mandate — which requires customers to undergo MFA for most purchases — may have been passed with the intention of stopping fraud, but many small businesses are finding that it also increases customer friction.
In this month’s Feature Story, Nicole Jass, senior vice president of product at FIS, details how merchants can seize more control over their payments security with delegated authentication and thus provide more seamless experiences for their customers.
Substandard payments authentication can make identity fraud an unsurmountable issue for merchants, which forced the EU to step in with its SCA requirement to stop bad actors. Many businesses are finding it difficult to meet these new MFA standards, however.
This month’s Deep Dive explores how delegated authentication — which puts the SCA onus on merchants instead of issuers and acquirers — is enabling European merchants to more smoothly navigate new requirements.
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