In the absence of SCA, failure rates are typically higher online when compared to the F2F channel, and this is because of the higher incidence of fraud online as well as the complexity of online payment flows. However, false declines do occur online (good customers that attempt transactions but end up having transactions declined), and they are estimated to cost retailers over EUR 20 billion in lost retail sales each year (even before accounting for the impact of SCA). A lot of the problems relating to these false declines are outside of the merchant’s control, but steps can be taken to minimise these.
Source: CMSPI, Strong Customer Authentication – Impact Assessment: August 2021
According to CMSPI, European weighted average failure rate on transactions being challenged as a result of SCA for the month of August was estimated at 26% – compared to 24% in July 2021. These high failure rates are a combination of consumers abandoning transactions due to the friction introduced as a result of two-factor authentication as well as difficulties faced by the industry in implementing solutions (timing and latency, differences in interpretation of rules, low levels of exemption usage).
CMSPI suggests that if the rate stayed at this level over a 12-month period it would mean EUR 82 billion of sales at risk, and this figure is over 40 times the value of fraudulent transactions in the SEPA region in 2018 – a hammer to crack a nut.
CMSPI is a global, independent payments consultancy, working exclusively with some of the world’s largest merchants, implementing optimal payments strategies and supply chains. The consultancy collaborates with merchants only and has no affiliation to any financial institution or bank. Besides, CMSPI's advocacy and economics team works closely with global regulators and trade bodies, representing merchants in collective efforts to campaign for fair and transparent payments landscapes worldwide. To learn more about CMSPI’s Strong Customer Authentication (SCA) Impact Assessment, please click here for July 2021.
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