The Benefits of Strong Customer Authentication

 

Strong Customer Authentication is among the core regulations that payment services need to abide by under the new European Revised Payment Service Directive, PSD2.  The rise of open banking and online payments has seen governments implement SCA to reduce fraud, to help secure the transaction of digital payments, and also to protect consumers across digital channels. SCA requires customers to verify their identity before payment transfers can occur online, whether with a financial service, institution, or third-party business.

Authentication is important because it provides an extra layer of security for customers as well as payment service providers alike. Since PSD2 simplified payments systems along electronic channels, it opened up banking platforms into a single market. In order to combat the potential fraud found with online services, Strong Customer Authentication forces banks to uphold a standard of security by verifying users before any payments are authorized.

There are various benefits of SCA. One of them is that it reduces the cost of inaccurate processing. This technology ensures that each client is making an active as well as conscious request when initiating a money transfer. Overall limits to the number of transactions can lower total transfer expenditures, and it can also significantly lower the number of incorrect payment requests. With reports stating that “friendly fraud” could have cost banks $50 billion in 2020, a reduction in accidental transfers is a huge boon.

Another benefit of Strong Customer Authentication is that it helps deter fraudulent attempts by bad actors. Large digital firms saw an increase of fraudulent attacks by 39.48 percent in the year 2020. For every dollar of fraud, financial services pay $3.78 in average costs. When you are able to determine the validity of all users and each transaction, it can help in the fight against fraudulent bad actors. Even though SCA infrastructure may create upfront overhead, its ability to protect against illegitimate claims will be good in the long run.

For more information on the benefits of Strong Customer Authentication, visit our website at https://loginid.io/

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