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Weak customer authentication - Why the PSD2 SCA requirements are only now taking effect and why this is an opportunity for banks

Abstract

On 31 December 2020, the last of the transition periods for implementing strong customer authentication under PSD2 ended. As a result, increased purchase abandonment rates can already be observed for card payments in e-commerce, which is becoming increasingly important. These not only have a negative impact on the issuer's revenues, but also risk the loss of the customer interface in the long term through migration to alternative cards or payment methods.

However, the tightening of requirements also creates opportunities: according to a market analysis conducted by CORE with more than 100 issuers surveyed, most of them are compliant with regulations, but the current implementations often show great potential for improvement in terms of security, convenience and operating costs.