Recently, the European Banking Authority presented proposals for introducing so-called strong customer authentication (SCA). These propose uniform, universal requirements for all online transactions above the equivalent of 10 euros — involving additional steps during payment, such as entering a password, code, or using a card reader.

What the EU proposal entails

Independent consumer research commissioned by Visa in five European countries reveals possible consequences of the proposed changes. In practice, the proposals would lead to the following outcomes:

  • Elimination of fast payments in e-commerce. This includes one-click payments — even when a consumer regularly shops at a given online store. Also eliminated would be quick automated payments in mobile apps where payment details are already saved. According to Visa's estimates, more than half of all online shoppers in Europe would be affected. Survey results show that nearly two-thirds (61%) of respondents would abandon transactions if online purchasing and payment procedures were lengthened.
  • Restricted access to international online shopping. Under the proposed rules, online stores outside Europe would need to comply with new European regulations, or purchases would be automatically blocked. Visa estimates this would affect payments totaling over EUR 6 billion, representing two-thirds of all transactions Europeans make on international websites. Currently, 51% of customers make purchases in non-EU online stores.
  • Longer queues and difficulties using payment cards in places like motorway toll booths or parking meters — where PIN entry is currently not required. In France alone, the effects of the proposed changes would be felt in over 500 million car trips annually.

Impact on consumers and businesses

Peter Bayley, Director of Risk Management for Europe at Visa, stated: “The new proposals risk causing serious disruptions to the way we make purchases. We expect a series of complications and obstacles that will lead to a higher number of rejected transactions, especially in all-electronic payments.”

Peter Bayley added: “There is no evidence that the proposed restrictions will actually reduce fraud. We currently have a well-functioning system based on risk-based authentication. It allows rational decisions about transaction risk, such as based on the device used or past purchasing behavior.”

Balance between security and convenience

The rate of unauthorized transactions for Visa payments is currently low — 5 eurocents for every 100 euros spent (with Poland’s rate being about 10 times lower — 5 eurocents per 1,000 euros spent). Consumers are already protected against losses due to fraud — the full risk is borne by retailers and banks, who, together with Visa, have already implemented a range of security measures aimed at preventing unauthorized online transactions. They are willing to accept this risk to ensure fast and efficient customer service, knowing that doing so increases their sales chances and meets consumer expectations.

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Summary

The European Banking Authority wants to impose uniform strong customer authentication requirements on all e-commerce customers for online transactions above 10 euros. According to Visa’s estimates, these changes would affect more than half of European online shoppers, with 61% of respondents indicating they would abandon purchases if payment processes became more complicated.

Additional consequences include restricted access to non-European stores — transactions worth over EUR 6 billion — and problems in locations where PIN is not currently required. The final version of the standards is to be published on January 12, 2017, as part of the PSD2 directive's implementation.