New security measures could block EU purchases
More than one-third of online purchases could be blocked by new European rules on Strong Customer Authentication, which could cost merchants to lose as much as $100 billion in sales, according a report in FinExtra.
CMSPI, a payments consultancy, ran an analysis that indicated problems will arise for e-commerce merchants beginning in January 2021 with the introduction of 3D-Secure Version 2.0, an authentication protocol developed by the major card schemes.
The CMSPI report stated that the technology is "relatively new and unproven", and added "significant unnecessary friction to the online commerce experience."
The new security protocol will add between 60 seconds and two minutes to the checkout process. Testing shows 25% of 3DS2 transactions are abandoned by consumers, compared with single-digit numbers without the technology.
Additionally, as many as 35% of 3DS2 transactions fail to go through due to technical errors or because the transaction was declined. If not corrected, that would amount to €108.1 billion ($126B) in lost sales based on 2019 sales volume, which is one hundred times the annual amount of card fraud.
Toby McFarlane, head of approvals and fraud comments for CMSPI said: "Both merchants and card issuers have clearly been busy with the pandemic and neither have had the time to give this important new technology the attention it requires. Payment security is one of merchants' top priorities, but they need the time to do this right. This is particularly bad timing because store shutdowns have made retailers rely on online sales for more of their revenue than ever before."