Banks and Retailers to Implement New Anti-Fraud Measures

Many banks and retailers have started to implement new checks in order to combat fraud online.

The Strong Customer Authentication (SCA) measures are slowly being rolled out by lenders and credit card companies.

This involves asking customers to input a one-time passcode in order to verify their identity before being able to complete a transaction online.

What is Strong Customer Authentication?

SCA is an EU initiative that seeks to reduce payment fraud across Europe.

2018 saw a 19% increase on 2017 for the amount of money lost to fraud on UK payment cards. This was estimated to be around £671 million in total.

The law will officially change on September 14, but many financial institutions and retailers were not ready to implement their SCA measures by this date.

The Financial Conduct Authority has given providers until March 2021 to put their anti-fraud measures in place, and will only start prosecuting those who fall short of the law after this time.

The FCA has advised that it expects to see banks and retailers apply their SCA measures over the next 18 months. So customers should expect to see changes soon, depending on where you shop and who you bank with.

How it works

Strong Customer Authentication involves payment providers seeking extra verification from online shoppers for particular online payments.

If someone seeks to spend over a certain amount (set currently at £28), a one-time password will be sent to their mobile phone via text message in order to verify the customer’s identity.

Voice recognition and fingerprint identification are other forms of verification that could possibly be used.

Shoppers will also start to see changes when spending in-store too. Customers will occasionally be asked to enter their pin number in order to make contactless or mobile wallet payments.

Why the delay?

Banks and retailers felt that the 14 September deadline for implementing SCA measures was unrealistic and lobbied the government.

The British Retail Consortium claimed that it would have meant ‘significant disruption to online payments’ for them to try and implement the changes by this date. The reason given was that providers would not be adequately prepared in time.

They estimated a 25-30% drop in the number of transactions carried out online within the UK as a result.

Andrew Cregan, policy advisor of the British Retail Consortium, said:  "The technical solutions weren't going to be ready on time, nor the guidance to go with them."

"You could have seen online transactions abandoned due to people simply not receiving the passcode if their bank didn't hold the correct phone number or if there was no mobile signal."

Providers are expected to contact their customers over the next 18 months regarding the changes they will be making as a result of SCA.

John Lewis notified its customers this week of changes to the way payments would be taken both online and in-store.

A spokeswoman for the retailer said: "We are trying to give customers the heads-up, so there won't be any barriers to transacting. We want to be on the front foot."

Many banks and payment solution providers, including Apple and Stripe, have also published their own alerts to customers notifying them of changes to their payment processes.