Amadeus has warned new EU anti-fraud rules risk “massive loss of business” for online retailers despite the UK regulator’s decision to delay enforcement.
An EU requirement for Strong Customer Authentication (SCA) on e-commerce payments over £30 means card issuers could decline transactions without two-factor authentication from September 14.
Jean-Christophe Lacour, Amadeus head of merchant services, said: “We don’t know what the decline rate will be” but insisted the firm “would be ready as a GDS and payment provider” despite confusion about how regulators will enforce the rules across Europe.
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SCA marks the final phase of EU Payment Services Directive 2 (PSD2) and aims to cut online payment fraud, which is up to six times the rate of offline card fraud, despite banks and retailers already using 3D Secure authentication online. It applies to card issuers and acquirers, which process card payments, and means secondary authentication of payments before sales goes through.
Lacour said: “From September, a [card] issuer could decline any transaction [over £30] without two factor authentication. This could have a serious impact on conversion rates for a business that does not do a lot of authentication [now].”
He explained: “The fraud rate on e-commerce is 10p-12p per £100 [with 3D Secure]. It varies by industry and merchant [but] that is the reality.” That compares to an average 4p per £100 on all sales. However, fraud on non-3D Secure transactions “could be double” the 3D Secure rate or six times the average.
Lacour noted “authentication cuts conversion” and said: “Some merchants screen transactions and decide fraud is a low risk. Amazon has built [its business on] one-click shopping.”
The UK regulator, the Financial Conduct Authority, has said it won’t take immediate enforcement action from September. But Lacour warned: “It’s not clear all [EU] regulators take the same view.”
However, he insisted: “We’ll be ready for online agents and we encourage them to be. They can trigger [customer] authentication and we pass it on.”
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