Visa Europe says a nuanced and segmented risk-based approach is required for e-commerce. If you have already determined that a transaction is legitimate, there is absolutely no need to force a customer to authenticate themselves.
In a new white paper titled “The Regulatory Requirements for Strong Customer Authentication (SCA) of Online Payments,” Visa Europe says any regulation governing online payments should enable and encourage the e-commerce sector to balance the twin considerations of risk and convenience (otherwise growth would be stifled and costs would increase.)
As the European Banking Authority (EBA) develops its Regulatory Technical Standards, and as the EU Member States consider the detail of PSD2, Visa urges them to keep this principle top of mind – which will keep fraud in check without compromising the success story of European e-commerce
E-commerce is a hugely important sector for the European economy. Across Europe, the e-commerce sector is large, it’s disproportionately significant, and it’s growing rapidly.
Across Europe the B2C e-commerce sector is valued at more than €432 billion, and employs around 2.5 million people.
It’s growing ten times faster than the wider economy (14% compared with 1.4%)
As a proportion of the EU economy it’s forecast to more than double within the next five years (from 2.45% to 6% of GDP) In just one year, the number of transactional B2C websites leapt from 650,000 to 715,000 and the number of parcels sent went from 3.7 billion to 4.0 billion.
On a global scale, the European e-commerce market is second only to Asia Pacific (a region of 4.3 billion people, compared to a more modest 0.7 billion in Europe).
The payment experience has a noticeable impact across all channels – but it’s a mighty impact for e-commerce and a matter of life and death for m-commerce. In particular, Visa sees (and increasingly quantify) a direct correlation between convenience and conversion rates. Conversion Rate Optimization (A/B testing) – just by re-designing a checkout page, you often see conversion uplifts of 5-to-25%. A higher quality payments experience translates to a significant, quantifiable sales uplift.
Visa Europe a particular trend is for so-called Card on File payments (think Amazon, Booking.com or iTunes) – friction is removed because payments can be pulled automatically from a cardholder’s registered card.
In the UK, for example, most issuers now use risk-based authentication as part of Verified by Visa. Results include: 85% reduction in checkout times compared to previous Verified by Visa implementations; 70% reduction in abandonment rates compared to previous Verified by Visa implementations; 5% of transactions sifted out for active authentication o 0% increase in fraud rates; and 85% fewer inbound calls relating to password re-sets.
For data, background and forecasts on Strong Customer Authentication: Search CardWeb.com’s CardFlash® Library of more than 58,000 archived articles; Access CardWeb.com’s CardData® for current and historical Performance, Portfolios, Profiles, etc. Visit RAM Research® (ramresearch.com) for quarterly and annual forecasts covering more than 150 metrics. [complimentary or deeply discounted access to CardWeb.com subscribers].
Additional database resources include CardWeb.com’s CardExecs® – comings & goings of payments movers & shakers; CardWeb.com’s CardWatch® – ears & eyes on marketing globally (57K items); and CardWeb.com’s CardPixes® – form & function of card design (7K items).