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In the modern landscape of online security and e-commerce, safeguarding customer transactions has become increasingly critical. Strong Customer Authentication (SCA) is a set of regulations designed to enhance the security of electronic payments, ensuring that online transactions are completed securely while protecting consumer data. This guide provides an in-depth exploration of SCA, including its definition, requirements, benefits, and implementation strategies.
Strong Customer Authentication (SCA) is a key requirement under the European Union’s Revised Payment Services Directive (PSD2). It requires payment service providers to implement multi-factor authentication for electronic transactions. This means that instead of relying on just one method of verification (like a password), customers must verify their identity using at least two out of three elements:
Something they know (e.g., a password or PIN)
Something they have (e.g., a phone or hardware token)
Something they are (e.g., fingerprint or facial recognition)
The main goal of SCA is to reduce online payment fraud and create a safer environment for digital commerce across Europe.
To satisfy SCA requirements, authentication must incorporate at least two out of three specified factors:
This includes PINs, passwords, or answers to security questions. These knowledge-based factors are unique to each user and serve as one layer of security.
Commonly, this factor includes a smartphone, smart card, or token generator device. This possession factor helps verify that the person making the transaction has physical control over a recognized device.
This category includes biometric data like fingerprints, facial recognition, or iris scans, providing a unique identity factor that’s difficult to replicate.
By leveraging these three factors, SCA aims to create a highly secure authentication framework, making it harder for unauthorized users to access customer accounts or conduct fraudulent transactions.
The primary goal of SCA is to minimize online fraud, which has surged with the rise of e-commerce and digital payment systems. Fraudulent transactions result in significant financial losses and erode trust between businesses and customers. SCA addresses these concerns by implementing stronger verification processes that help prevent unauthorized transactions.
For businesses operating in the European Economic Area (EEA), compliance with PSD2 and SCA is mandatory. Failing to adhere to these regulations can result in penalties, loss of customer trust, and restrictions on payment processing capabilities.
As data breaches and security incidents continue to make headlines, consumers are becoming increasingly conscious of the security of their personal information. Implementing SCA reassures customers that their data and payments are secure, helping build brand loyalty and trust.
To see SCA in action, let’s walk through a typical online purchase scenario. When a customer proceeds to checkout, SCA requires more than just entering card details — it adds an extra layer of security through multi-factor authentication. Here’s a step-by-step breakdown:
Payment Initiation
The customer enters their card or payment details and initiates the transaction.
Two-Factor Authentication Prompt
Before the payment is processed, the customer is redirected to a secure authentication page. Here, the payment provider requests verification using two out of the three SCA factors:
Something the customer knows (e.g., a password or PIN)
Something the customer has (e.g., a smartphone or security token)
Something the customer is (e.g., fingerprint or facial recognition)
Transaction Verification and Completion
Once the customer successfully verifies their identity, the payment is authorized, and the transaction is completed securely.
This multi-step authentication process significantly enhances payment security by reducing the risk of fraud and unauthorized transactions.
While SCA enhances security, it may lead to additional friction in the user experience. To balance security with convenience, PSD2 includes certain exemptions where SCA may not be required:
For payments below €30, authentication may be skipped. However, after five consecutive low-value transactions or a cumulative €100 without authentication, SCA will be required.
For payments of the same amount to the same merchant, such as subscriptions, SCA is required only for the initial payment.
Customers can add trusted merchants to their list of beneficiaries, bypassing the authentication requirement for future transactions.
If the payment provider can demonstrate a low level of fraud, they may be eligible for an SCA exemption under TRA, subject to regulatory approval.
These exemptions help strike a balance between user convenience and security, optimizing the customer experience without compromising data protection.
While SCA is beneficial, implementing it presents unique challenges for businesses and financial institutions:
Despite the challenges, SCA offers numerous advantages, not only by protecting businesses but also by enhancing the customer experience. Key benefits include:
For businesses looking to implement SCA, several strategies can ensure smooth integration:
As cybersecurity threats grow more sophisticated, the tools and technologies used to protect customer data must evolve as well. Emerging innovations like behavioral biometrics—which analyze user behavior patterns such as typing speed or mouse movements—are poised to enhance SCA by offering seamless yet powerful authentication methods.
At the same time, as regulatory standards continue to develop, businesses and payment providers must remain agile, adapting to new requirements while maintaining a smooth and convenient user experience.
In today’s digital-first world, Strong Customer Authentication (SCA) remains essential for safeguarding transactions and fostering consumer confidence. Organizations that proactively implement and refine SCA practices not only reduce fraud risk but also build lasting trust with their customers—offering a clear competitive advantage in the digital marketplace.
With many years of rich experience in technology development, Logibiz Technologies aim to boost your online presence by offering 360-degree solutions related to Online Payments and its Security.
From Online Fraud Prevention solutions to White Label Payment Gateway Platform and complete 3DS testing environment, Logibiz has got your back. Additionally, we also offer consultancy services for all your EMVCo & Card Scheme certification needs.
We provide Free Demo & POC of our products which are certified globally and trusted by leading Financial Institutions worldwide.
Book a Free Consultation Call with our experts to discuss how we can help grow your online payments business.
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The 3DS Server provides a functional interface between the Directory Server (DS) and the 3DS Requestor Environment flows. 3DS Server is responsible for gathering necessary data elements for 3-D Secure messages, authenticating the DS, validating the DS, the 3DS SDK, and the 3DS Requestor, safeguarding the message contents. The 3DS Server also helps to protect the message content while it is being transferred to DS and vice versa.