The Benefits of Strong Customer Authentication (SCA) for Securing Your Data

Have you come across the triumvirate of payment security? Something they are aware of! Something they possess! They are something! That is precisely the prerequisite of Strong Customer Authentication (SCA)! Let's find out more about the superstar of online and contactless in-person payments in Europe! The European Union's introduction of Strong Customer Authentication is an effort to reduce online and contactless offline payment fraud within the European Economic Area by enhancing security. This mandate is from the Payment Services Directive (PSD2) and is applicable to payment services providers of a business as well as the bank/card provider of the consumer. This means that European customers must complete extra steps of verification when making a payment. Despite the SCA requirements being brought in during September 2019, the date to begin their implementation has been put back to December 31, 2020, as the industry wasn't quite ready. In order to meet the requirements of SCA and ensure secure transactions, extra authentication steps must be added during the checkout process. These measures also necessitate the banks to carry out additional verifications to confirm the customer's identity. address, driver's license, and social security number. Customers must give two of the following three items to go through the authentication process: address, driver's license, and social security number. SCA provides options for various authentication practices other than the 'something they know' strategy. For example: Facial recognition or fingerprint verification, both of which are used in conjunction with their smartphone. A code sent to their smartphone in combination with their personal password. One more example of SCA would be combining a fingerprint scan or a one-time verification code sent to a cell phone with the account sign-in. In situations where SCA is required, it must be completed. Such circumstances may include but are not limited to online banking transactions, payments made through digital channels, and other operations that involve the sharing of financial data. SCA is a necessity in certain circumstances, including but not limited to online banking transactions, payments made electronically, and other processes that involve the transfer of monetary information. Utilizing a payment account over the internet. Beginning an electronic payment process. Carrying out any activity via a remote platform that has the potential to result in payment fraud or exploitation. SCA mainly affects card payments and bank transfers given their quickness and activation by end-users, thus making SCA a suitable option for risk management. SCA regulations under PSD2 apply mainly to banks rather than merchants. Any banks approving transactions not in compliance with the set standards are in violation of the laws from their home nations. An authorization code should be generated if SCA authentication is successful, which allows customers to make secure online payments. If the two valid authentication categories are not met, then the payment will be denied. SCA exclusively relates to two-stage deals where the customer's and supplier's banks are situated in the European Union (EU) or the European Economic Area (EEA). As well, a selection of European banks are obliged to follow SCA for "one leg out transactions" (which refers to transactions in which the consumer is in Europe while the retailer is located outside of Europe). Strong Customer Authentication is included in the payment process, which has three distinct stages: We can show this procedure with the situation of a client getting an item on the web. Sarah, an online shopper, puts a laptop in her shopping cart and goes to the checkout page on an e-commerce website. The PISP is responsible for verifying Sarah's bank details for the payment setup and guarantees a safe transaction. Once authentication is completed, the PISP takes over, guaranteeing an uninterrupted and secure transfer of the money. This situation serves to illustrate how significant SCA is in guaranteeing an authenticated, protected, and successful payment transaction from start to finish. Dynamic linking functions as a confidential code that verifies each purchase for the purpose of ensuring that it is you and that what you agreed to is accurate. Payments that are made through the internet and are outside of the traditional setting are secured with SCA through a process called 'dynamic linking'. This linking requires Third-Party Providers (TPPs) to generate an authorization code or token that ties the payment to its intended recipient and the total amount. If anything changes with either the recipient or the amount, the authorization code is no longer valid, requiring a new one to finish the transaction. For example, when an individual orders groceries online, the total cost, including applicable taxes and charges, should be clear to them, and they must specify which grocery store they are buying from. If any alterations are made, authorization is given with a code but this code will be rendered invalid, so then a different authorization code is required. Ideally, every online transaction should include SCA and dynamic linking to give extra authentication, protect customer data, and prevent fraudulent charges beyond what is required by regulations. It was recognized that SCA is necessary for digital and contactless offline payments in the European Economic Area. Nevertheless, some transactions are not subject to SCA or excluded from the PSD2 SCA scope. SCA boosts payment security, but it can also make the payment process more complicated. To tackle this, particular transaction categories are exempted from SCA prerequisites. Transactions that are considered to be of low risk are believed to be less likely to be fraudulent, and may not require SCA. These transactions usually involve small amounts of money, or are conducted with a merchant who has a trusted record of security. A customer pays €10 for a digital subscription using the credit card information they already have on file. Purchases with a value of less than €30 are not required to comply with SCA. This exception has been introduced to provide both security and convenience with low-value transactions. A customer obtains a coffee for €2.50 by using touchless payment. Payments that occur on a repeating basis, where the customer has already granted permission to the seller to take payments periodically, are not subject to SCA for future payments. This lowers the amount of difficulty experienced for repeat purchases. A customer has their €50 monthly gym membership fee automatically taken from their account. Merchant banking activities like direct debits or card-on-file payments will be excluded from SCA since the consumer has already granted authorization for those dealings. A direct debit is set up by the customer to make automated payments to the utility company toward their utility bill. Merchants with a strong record of security and a minimum of fraudulent activities might be added to the customer's bank's whitelist, removing the need for SCA when making purchases from those retailers. This is based on the confidence and risk assessment of the bank. A client buys something from a reliable internet merchant with an esteemed record of safety. Corporate payments are not required to comply with SCA because the payer and payee are businesses. These transactions normally have various control and risk prevention practices in place. A company takes care of an invoice to a different company by way of a bank-to-bank transfer. These exemptions seek to find the right blend of safety and comfort, guaranteeing that SCA is used suitably while minimizing hassle for transactions that present a minimal amount of risk. Essentially, online security and transactions need to be managed carefully in this digital era. Strong Customer Authentication (SCA) is an effective way to prevent unauthorized access and malicious activities. This helps to make online purchases secure and trustworthy for both service providers and customers. As we say goodbye to our exploration of SCA, the journey does not end here! Be prepared for our upcoming post, which will provide insight into the complexities of 3 Domain Secure (3DS), an effective tool for safeguarding online transactions. Gain deeper insights into the payment system, including chargebacks and disputes, by connecting with us on LinkedIn, Twitter, Facebook, and Threads.

Source: https://backspace-tech.medium.com/strong-customer-authentication-sca-your-security-bff-be8ecce2c4bd?source=rss------fintech-5