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SCA rules threaten existing PSP-merchant relationships

A new strong customer authentication (SCA) regulation being introduced in September will change the payments landscape for online merchants amid a race for the most frictionless customer experience.

By Anna Fedorova


SCA rules imposed under the revised Payment Services Directive (PSD2) are forcing payment service providers (PSP) to reassess their relationships with merchants based on their fraud rates.


Andrea Dunlop,

Under the new EU-wide rules, remote card-based transactions above €30 may have to go through a two-factor authentication process, depending on the fraud rates of the acquiring bank and the issuer.

If the acquirer’s fraud rate does not exceed 0.13%, transactions up to €100 may be exempt, with this threshold rising to €250 for fraud rates of 0.06% and below, and €500 for rates under 0.01%.

“There is no doubt the consumer experience is benefited when the threshold is raised so that fewer payments are subject to authentication,” says Andrea Dunlop, CEO of merchant acquiring, Europe, at Paysafe.

“Acquirers will be heavily focused on their fraud rates and may take subsequent action to reduce them.”

Market division

This new rule is likely to create a division in the market, say some, with certain PSPs striving to work exclusively with lower risk-rate merchants to create a more frictionless experience for clients, with others focusing on higher-risk models and charging them higher transaction fees.

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