Across Europe, online retailers will miss out on €57 billion in revenue in the first year of Strong Customer Authentication (SCA). This is the result of a study by Stripe and 451 Research.
SCA stems from an EU directive that requires two-factor authentication for some online payment methods. Here, the identity of the user is ensured by an additional measure. This can be, for example, a PIN that the customer is sent to their cell phone and has to enter. This should make it much more difficult for hackers to misuse customer data.
However, the new process would also make the payment process longer and more complicated, which could lead to more abandoned purchases. Even now, only 47 percent of European consumers believe that online purchasing processes are "very simple" these days. 74 percent of "Generation Z" shoppers have abandoned an online purchase in the last six months due to an unsatisfactory buying process. More than half of online shoppers (52 percent) who abandon a purchase later complete the transaction at a competing retailer. So SCA is likely to make the situation worse. Especially since 73 percent of shoppers aren't even aware of the new authentication requirements.
Companies are not prepared
The payment platform Stripe and 451 Research therefore summarize in a study: In the first twelve months after the SCA comes into force, European online retailers will lose 57 billion euros in revenue. In addition, only 40 percent of businesses that are even aware of the regulation are prepared for it. And only one in two companies expect to be online by the deadline of 14. September can implement all the requirements of the new regulation.
In this regard, strong customer authentication will particularly affect small companies: Three in five companies with fewer than 100 employees are either unfamiliar with SCA, don't plan to be compliant before September, or are unsure when they will be ready. This is a significant difference compared to larger companies with more than 5.000 employees, with only one in 25 payment professionals unaware of the upcoming changes.