From September 14, 2019, new European Union rules will enhance the security of e-commerce transactions and limit online fraud. Additional security authentications will be required for certain online transactions using the latest version of the industry protocol for Strong Customer Authentication (SCA), 3D Secure (3DS). Worldline’s Deputy CEO Marc-Henri Desportes talks here about how Worldline is helping banks and merchants seize the opportunities of these far-reaching developments.
Why does the European payments landscape need SCA and 3DS?
In a word: security! With the implementation of the PSD2, the second Payments Services Directive, Europe is moving towards a new era of payments innovation and standardization. The aim is to bring down barriers to competition, reduce fragmentation and support new digital services.
If Europe is going to achieve this vision of a digitally enabled future, it must take urgent steps to reduce fraud. With more and more new players joining the payment ecosystem and offering all sorts of new services enabled by PSD2, consumers must be provided with new levels of trustworthiness. That is where Strong Customer Authentication (SCA) and 3D Secure (3DS) come into play. I believe that they are set to play an important role in providing a secure foundation for the next wave of digital payments.
Worldline is one of the few players to cover all parts of the payments value chain. How prepared is the ecosystem for the new rules?
We sense a lot of uncertainty in all areas, both in terms of business impact and technical implementation. In some countries, a large proportion of issuers, acquirers and merchants are currently not compliant with the SCA regulations.
While the new rules will apply from September 14, the European Banking Authority has recommended national regulators allow a transition period for the implementation of the rules. This is a clear sign that no-one expects these changes to happen overnight. After all, this is a huge undertaking involving more than 500 million people, 25 million merchants and 5,000 banks across Europe.
What about Worldline? Is Worldline preparing for the new requirements?
As the leading European payments player, Worldline has been heavily involved in shaping the industry’s response to the PSD2, including SCA. It has always been our highest priority to ensure the security of transactions and to use the latest technologies to reduce the risk of fraud. Since 2017, we have been working with banks, card schemes and selected merchants on a project that supports 3DS 2.1 in the real world. It is our mission to make the payments industry PSD2-ready.
Since May 2019, we have been one of the very first payment providers to process credit card transactions using 3DS 2.1. Our payment acceptance solution is Europe’s leading payments gateway and is fully certified for 3DS 2.1.
For banks we have developed a range of complementary solutions to ensure they meet their PSD2 SCA obligations while keeping customer experience top of mind. These solutions include WL Access Control Server, which supports 3DS 2.1, as well as WL Trusted Authentication, which provides strong authentication using a PIN code or fingerprint.
How is Worldline helping merchants identify the opportunities from these new rules?
From our discussions with merchants, they have two main concerns. Firstly, that banks will strictly apply the new SCA rules which would mean that they would not approve their customers’ non-authenticated transactions from September. Secondly, that there will be too much hassle involved in authenticating customers using 3DS and two-factor authentication, so consumers will drop out and abandon their purchases. No merchant wants to see that.
These concerns are understandable, but there are solutions to manage them.The first point to note is that a transition period for implementation should give everyone in the payment ecosystem – merchants, financial institutions, PSPs, etc. – time to adapt to the new rules.
We therefore believe there is a great opportunity for merchants not just to comply with the rules but to create value by developing new services for their customers. It may seem challenging right now, but the regulations will provide Europeans with access to new, more secure and user-friendly payment services.
In the long term, consumers will feel more confident using their payment means online and conversion rates and transaction volumes will increase, to the benefit of everyone in the payments value chain.
How is Worldline helping banks get ready to develop new security measures?
There is much more to the SCA challenge than just achieving compliance. Compliance alone will not give consumers the trusted experience that they desire. Banks are evaluating how to improve and rationalize their customer authentication procedures and to create a smooth experience for their users.
We see SCA as a major strategic opportunity for our banking customers. Banks want to have the ability to support secure transactions that are fast, simple and consistent. They need to be able to create a seamless digital banking experience that customers can believe in. In this way, banks can build trust, develop relationships, enhance their brand reputation, keep customers loyal and support growth. This will be critical as open banking arrives in Europe and banks focus on maintaining strong connections to their own customers.
At Worldline, we are working closely with our clients in the banking sector on ways to manage the complexity and seize the opportunity. Security has been a priority at Worldline for more than 45 years. With solutions such as our ACS platform and our trusted authentication methods, we are helping banks across Europe implement 3DS and comply with all the different aspects of SCA. We understand the huge challenges involved in balancing security and customer experience with cost.
Building trust is a long and difficult process. We support our clients achieve this by implementing resilient, robust and scalable platforms which can handle the growth of new authentication requests and which can adapt to future developments in the market and in technologies.
How will the new standards change the payments value chain?
I expect that SCA will reshape many of the relationships in the ecosystem. For example, it will now mainly be the responsibility of issuers to decide about and ensure strong authentication. In this context, we could expect merchants to look for technology partners with effective Risk-Based Authentication (RBA) processes and low fraud rates, but also with excellent connection into the full payment ecosystem to guide them in the choices that will secure the maximum rates of seamless transactions. Handling SCA efficiently will become a competitive advantage.
Finally, effectively securing payments also involves empowering end-users. Banks can offer their clients new possibilities for setting spending limits on different payment methods or restricting usage to specific trusted devices, places and times. Consumers are going to be right at the heart of a new era for e-commerce in Europe.
At Worldline, we are ready to help our customers in all parts of the value chain prepare for this new era and develop more secure and more user-friendly payment services. We are already working with all areas of the ecosystem, from merchants to PSPs to issuers – nobody understands the operational impacts of the new rules better than us. Thanks to our geographic reach, we can help customers across Europe adapt to the regulations on a case-by-case basis as they are implemented in each country. Supported by our experience and our scale, Worldline is all set to be a key player in this exciting new chapter in the history of electronic payments.