Strong Customer Authentication (SCA) is a security measure required under the European Union’s Revised Payment Services Directive (PSD2). It adds an extra layer of protection for online payments by requiring customers to verify their identity using at least two of three elements: something they know, have, or are.
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By Vellis Team
Vellis Team
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This article will explore how SCA works, its main requirements, its impact on businesses, possible exemptions, and how it can be effectively implemented.
SCA is a security requirement that protects online payments by asking users to verify their identity in two or more ways, like entering a password and confirming through a mobile device. It’s a mandatory standard for electronic payments within the European Union and the European Economic Area. The aim is to reduce online fraud and ensure safer digital transactions. SCA applies to a wide range of industries, including gambling payment processors, which must follow these rules to process payments securely. By adding extra steps, SCA helps confirm that the person making a payment is the account holder.
To meet SCA standards, a payment must include at least two out of the following three security elements. These are designed to make sure the person making the transaction is really who they say they are by:
Using just one of these isn’t enough. For a transaction to follow SCA rules, two or more elements must be verified. This helps reduce fraud and is especially important in high-risk industries where an online casino chargeback could otherwise be more likely.
SCA plays a vital role in protecting users from unauthorized access and payment fraud. By requiring multiple layers of verification, it is harder for someone to misuse another person’s payment information, even if they have some of the details. With the growing popularity of online payments and digital banking, the risk of cyberattacks has also increased. SCA helps keep these transactions secure, giving both businesses and customers peace of mind. It also builds trust. When consumers know their data is protected, they’re more likely to complete purchases. This is especially important in sectors like a no KYC casino, where user confidence is crucial.
SCA is required in situations where there’s a higher risk of fraud or unauthorized access, especially during digital transactions. Here are the main cases where SCA must be applied:
In-person payments are usually exempt from SCA unless the method involves biometrics—like a fingerprint scan on a smartphone.
While SCA boosts payment security, there are situations where it’s not always required. These exemptions help keep the process quick and user-friendly:
Risk-based authentication and transaction risk analysis help decide when a transaction is low-risk enough to bypass SCA without sacrificing safety.
SCA can introduce extra steps during checkout, which sometimes causes friction for customers, leading to longer payment times or even abandoned carts. This can impact conversion rates, especially if the process feels confusing or inconvenient. To stay compliant, merchants need to:
Payment service providers play a key role in handling most of the SCA logic behind the scenes. They help apply the right security measures, manage exemptions, and keep the process smooth while still meeting regulatory requirements.
To implement SCA, businesses should update their checkout flows and integrate 3D Secure 2 (3DS2) for smooth authentication. Partnering with compliant payment service providers (PSPs) is essential to meet requirements. Additionally, educating customers about the new steps helps reduce confusion and ensures a better payment experience during the transition to stronger security.
Strong Customer Authentication relies on several key technologies to keep payments secure:
However, integrating these tools can be challenging for businesses with older legacy systems that may need upgrades to support new security standards.
SCA is a key part of PSD2, the EU’s directive promoting open banking, innovation, and stronger security. PSD2 encourages safer, more transparent payments, and SCA ensures transactions are verified with multiple factors. Together, they create a secure environment that protects consumers while enabling new financial services to flourish across Europe.
While SCA is specific to the EU, many other regions have similar security standards. In the U.S., multi-factor authentication serves a comparable role in protecting online payments. Global platforms often adapt by implementing flexible systems that meet different countries’ rules, ensuring secure transactions no matter where customers are located.
The future of customer authentication is moving toward more seamless and secure methods. Passwordless logins, which use biometrics or device recognition, are becoming popular. Behavioral biometrics analyze how users interact with devices for added security. Adaptive authentication adjusts security steps based on risk levels. We can expect ongoing regulatory updates that push for smarter, user-friendly SCA standards to keep pace with evolving threats.
A security process requiring users to verify online payments using two or more independent factors.
It helps protect against fraud and ensures that only the rightful user can authorize a payment.
It applies to most electronic payments and account access in the EU, especially card-not-present transactions.
Yes, including low-value transactions, recurring payments, and payments to trusted beneficiaries.
By using technologies like 3D Secure 2 and partnering with compliant PSPs to authenticate users.
Not legally required, but many global businesses adopt similar practices.
Fraud: Strong Customer Authentication (SCA) – What it is and how does it work?
https://www.fraud.com/post/strong-customer-authentication
Medium: Demystifying Strong Customer Authentication in 2024!
Checkout: Strong Customer Authentication (SCA) explained
https://www.checkout.com/blog/sca-101
PingIdentity: Strong Customer Authentication & Compliance Under PSD2
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