Strong Results For Strong Customer Authentication, Says Nationwide

May 11, 2022
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The UK’s largest building society has published new data showing the success of strong customer authentication in reducing fraudulent card payments.

The UK’s largest building society has published new data showing the success of strong customer authentication (SCA) in reducing fraudulent card payments.

In a press statement published on Monday (May 9), Nationwide Building Society said it is now seeing about 2,000 fewer cases of fraud per month as a result of SCA.

Nationwide introduced SCA for all online purchases on March 14 this year and believes that the success that it has seen is likely to have been replicated across the payments industry.

SCA requires that online shoppers verify their identity at checkout by responding to a push notification sent to their mobile banking app, or by inputting a one-time passcode sent to, for example, their email or mobile phone.

Based on a survey of 2,000 consumers, Nationwide also said that SCA has so far had a warm reception from online shoppers, in addition to its positive impact on fraud reduction.

More than two thirds of shoppers said they are happy for payments to take longer if it means they are better protected from fraud, the survey found.

When asked about SCA specifically, two in five respondents (42 percent) said it makes them feel safer when shopping online and more than a quarter (27 percent) said the extra security means they are more likely to shop online.

“Many people prefer the convenience of online shopping, and while merchants strive to make the checkout experience as quick and easy as possible, we generally accept that a small delay is worth it when it comes to our security and personal details,” said Matt Cox, chief product owner for digital payments at Nationwide Building Society.

“The introduction of new strong customer authentication measures adds just a few extra seconds to the check-out process for higher risk transactions, but they are vital for retailers and banks and building societies to check that it is the card owner making the purchase.”

Technical issues

Although the majority of payments that request SCA have been completed without issue, around a fifth (21 percent) of people said they had encountered difficulties.

The most obvious problem is that merchants who are not yet compliant with SCA rules, which came into force with a March 14, 2022 deadline, will see their transactions declined.

This follows data reported by Barclaycard last month that claims UK merchants who missed the March 14 deadline have suffered £130m in lost sales.

In total, 664,000 online transactions — an average of 22,000 per day — were declined during the month, according to the merchant acquirer.

But beyond this, there are other technical issues that consumers have reported while using SCA.

For example, 8 percent of respondents said they could not access a one-time passcode because their contact details held by their bank or building society were out of date.

Similarly, 7 percent said that they had experienced difficulties when shopping online due to not having their phone nearby, or due to having no access to their mobile banking app.

And another 7 percent said they found it difficult to access one-time passcodes due to weak phone signal coverage.

With online shopping volumes still continuing to grow, Nationwide said that convenience must not come at the expense of safety, and that shoppers must be protected with stronger security.

According to Nationwide member data, 28 percent of all purchases are now made online — an increase of 52 percent compared with five years ago.

Greater options

In March, consumer watchdog Which? warned that the improved security offered by SCA “could come at a cost for customers who don’t use mobile phones or have patchy reception”.

It argued that when adopting the requirement, the UK regulator did not give specific directions on how firms should implement SCA, and instead encouraged firms to develop their own ways to approve transactions.

This led to most banks relying on mobile phones for security, either by sending one-time passcodes via SMS or push notifications via their banking app.

In response to these issues, Nationwide said it has introduced a range of options to ensure that customers are able to complete an SCA check.

These include offering authentication either through the Nationwide mobile banking app, or one-time passcodes via either text, a card reader, landline or email.

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