Prepare for SCA

By | Category: Travel tips & opinions

Regardless of what you think of the EU today, September 14th sees another piece of legislation coming into practice. Banks and retailers have been gearing up for it for some time and you should be aware of how it will affect you.

Credit cards
Prepare to asked for a second authentication on your transactions

This rule, PSD2, (Payment Services Directive 2) is an attempt to combat online payment fraud which, not surprisingly, is the fastest growing part of fraud.

It is estimated that two-thirds of all fraud is due to online transactions.

As part of the procedures, when you buy something you will probably be asked for what the industry calls an SCA, (Strong Customer Authentication.).You will be asked to provide this second form of identification whenever your bank and the bank into which you are transferring the money into are based in the European Economic Area. And the UK is part of the EEA and likely to remain so.

Your bank, or credit card provider, in order to approve a payment leaving your account, will text you with a password which you must enter in order to complete the payment. Some banks have been using this system for some years but only to payments where you set up a new payee. After the first payment has been sent they no longer ask for a second item of information. Depending on who you bank is, you will probably have experienced something like this already.

The downside for the customer is that any payment process is likely to take a few minutes longer than at present. The advantage is that you should be better protected from suddenly finding your account has been depleted!

Although the new procedure came into effect on September 14th, banks and retailers have complained that insufficient time has been given to sort out all the systems necessary to implement it. Consequently, the Financial Conduct Authority has eannounced that it won’t enforce the law until March 2021.

Under the directive, all transactions over £28 must have two-stage authentication. As just about every travel product costs more than that, holidaymakers and travellers will be one of the first groups affected.

But as industry expert, Laurie Gablehouse of Ingenico told me, that £28 is an aggregated sum. Make three transactions of £10, £10 and £5 and you may not be asked for a second authentication. If, for example you make three payments; one for £10, £10 and £10 and you will be asked. Each time you reach that threshold you will be asked by your issue to authenticate.

In turn it will keep track of your payments and use them to track your expenditure so that it can see any unusual transactions. In this way, we the customer will be better protected.  

The supplier of whatever product or service you are buying will provide the bank or credit card with more details and in that way it will be protected too. The point of sale will be provided thus making it more likely for the banks to recognise legitimate addresses over fake ones. In time banks and credit card suppliers will crunch so much information about what you usual habits are that fraudulent activity should decrease.

It is because of the preparations to be able to crunch so much data says Gablehouse, that the banks and credit card suppliers asked for the delay. It requires considerable effort on their behalf to prepare for it. Plainly some are unready!

Earlier, I suggested a text message to a mobile might be used by your bank. That is just one method. A thumbprint on a smartphone or voice recognition might be used but given the error rate with voice authentication at present, few might opt for that route.

Contactless payment was supposed to make paying easier but that will also be affected by the directive. A payment of over £28 will require you to add another piece to identify you as the purchaser. That could be a pin code just like the old days of having to input a pin every time you used your credit or debit card. In the meantime, banks, retailers, credit card suppliers, and online traders will be letting you know about the new procedures.

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