Europe could lose €57bn following SCA implementation – Stripe study claims

Europe is set to lose €57bn in economic activity in the first 12 months after Strong Customer Authentication SCA takes effect, a study from Stripe claims.

The investigation, which was conducted by 451 Research, was based upon surveys filled in by 500 qualified payment professionals at online businesses and 1,000 consumers across the UK, France, Germany, the Netherlands and Spain.

SCA is part of the EU’s PSD2 directive and will fully come into effect on September 14. It requires require European consumers to confirm their identities for online purchases with 2-factors of authentication. This can be either something they know, like a password, something they have such as a phone and something physical about them like a fingerprint.

Through the research, the company found only 40 per cent of businesses aware of SCA said they felt prepared for it. With the deadline looming, only 44 per cent believe they would be compliant on the day it launches.

Three in five businesses with under 100 employees are either unfamiliar with SCA, do not plan to be compliant by the September deadline, or are unsure whether they will meet compliance. Larger institutions seem much more tuned in with developments, with only 1 in 25 companies with 5,000 employees being unaware of SCA.

In a bid to overcome compliance complications, many businesses are attempting to lower the amount of transactions which SCA is needed, the report stated. There are a few exemptions which can enable this, such as recurring payments, or transactions under €30 can be approved without the added layers.

When looking to solve challenges from the regulation, 50 per cent stated they plan to handle management completely in-house.

Stripe believes this presents a challenge for them. It said that exemptions are tough to administer due to the need of visibility on card networks. An example provided is that while purchases under €30 are exempt from SCA, once five transactions below €30 have been made or a combined value of €100 has been reached, the customer’s bank will request SCA.

Pressures on ensuring simplified customer checkout experiences were highlighted in the study. Of the respondents 74 per cent of Gen Z shoppers said they had abandoned online purchases due to poor experiences. Going on, 52 per cent proceeded to buy the product at a competing merchant.

Stripe stated the introduction of SCA will ‘likely’ make things worse. Of the respondents, 73 per cent said they were unaware of the impending authentication requirements.

451 Research analyst Jordan McKee said, “SCA is unequivocally the single most disruptive event to impact European digital commerce, and many businesses—especially smaller ones—have yet to fully grasp its extensive impact. Our study indicates low levels of preparedness and, most troublingly, a lack of appreciation for how SCA will transform how European consumers will buy online.”

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