Getting ready for PSD2 and Strong Customer Authentication (SCA)
Payment Services Directive II (PSD2) revises the first Payment Services Directive, regulating all payment services across the European Union (EU), the European Economic Area (EEA) and the United Kingdom. It became effective in January 2018 aiming to create a more open, competitive payments landscape across Europe. The revised directive introduced Strong Customer Authentication (SCA) – a set of new requirements for authenticating online payments expected to become enforceable at the end of 2020 across the EEA region.
According to UK Finance’s latest SCA industry implementation plan on the roll out of SCA in the United Kingdom, a five months long market readiness phase will start on January 1 2021. During this period, e-merchants and issuers are expected to complete their SCA implementations. Starting June 1, 2021 issuers will start to randomly check if ecommerce transactions are SCA compliant and will soft-decline those transactions that are not. On September 14, 2021 SCA will be fully enforceable in the UK.
Given the implementation timeline above, UK based ecommerce merchants have to ensure that all applicable payment methods can handle the new requirements on time to avoid loss of business. Merchants delaying SCA readiness beyond May 2021 may see transaction declines.
It is also important to note that card issuing banks or payment service providers will determine if a transaction requires SCA verification. UK businesses receiving payments from cards issued in an EEA country, where SCA will be enforceable by the end of this year, may need to prepare for a regulatory enforcement deadline of December 31, 2020.
SCA ascertains a customer's identity and relies on the presence of at least two factors for authentication of a transaction. As soon as SCA is mandatory, transactions that are not authenticated might be declined.
The impact of PSD2
All online businesses accepting credit card payments will need to ensure their checkouts can perform SCA challenges so that card-issuing banks can process payments unless an exception under the SCA rules would apply. If the required level of authentication is not provided, transactions will be declined.
For many consumers, SCA will be a new experience. As an example, card-issuing banks who use authentication services offered through Visa or MasterCard will display a challenge screen similar to the one below when customers place orders using their credit card.
If you have an online business, it will be important for you to help educate your customers about SCA and what they should do when they see a SCA challenge to avoid increased cart abandonment.
When PSD2 becomes enforceable
PSD2 introduced Strong Customer Authentication (SCA) – a set of new requirements for authenticating online payments expected to become enforceable at the end of 2020 across the EEA region and in September 2021 in the United Kingdom.
SCA and your Amazon Pay integration
To find out how to get your Amazon Pay integration ready to support SCA, refer to the table below:
If you've used a custom Amazon Pay integration, you need to update your Amazon Pay solution by applying code changes as described in the Amazon Pay SCA Upgrade Integration Guide. The Software Development Kits (SDKs) also include these changes.
Have you used an off-the-shelf ecommerce solution to add Amazon Pay to your store?
For more information, contact your Account Manager or Amazon Pay merchant support.