SCA exemptions. Although in general an issuing bank will allow, for example, a low-value transaction to go through a frictionless flow, it can happen that based on the pre-shared risk parameters from the merchant, the bank’s transaction analysis system may decide SCA is still required. The European Banking Authority has provided some guidance on MITs, and we’ll be exploring this topic further in a future post. In our subscription-based business, we see a lot of recurring transactions where the individual transactions share similar characteristics. 3DS 2.0’s significant improvements over 3DS 1.0, including a seamless experience and secure methods to replace static passwords, have been shown to result in a 70% decrease in cart abandonment and 85% reduction in transaction time.1. For merchants that have particular types of interactions with their repeat customers, MITs provide an opportunity to avoid multiple authentication requests in cases where the cardholder is not present, such as recurring billing payment plans with variable amounts (a utility bill, for example) when the standard recurring exemption would not apply. If the issuing bank of the card holder is not yet ready with 3DS2, they will still be obliged to have 3DS1 in place in order to comply with SCA mandates. This is probably the biggest difference between 3DS1 and 3DS2. While the ability to request exemptions will be available via Braintree’s 3DS 2.0 integration to merchants who qualify for them, it’s important to remember that exemptions were intended for certain use cases and business models. SCA has some options to improve conversion by leveraging what are called “exemptions.”  The first one refers to low-value transactions, i.e. How might obtaining an exemption impact the transaction lifecycle? If you are using the 2Checkout hosted or inline ordering engines, we’ve got you covered and there’s nothing you need to do. Is Your Business Ready for the Holiday Promotional Season. But since 3DS 2.0 is expected to dramatically reduce the frequency with which a cardholder is prompted to be an active participant in the authentication process, the amount of friction is also expected to be dramatically reduced. Instead of entering a password or just receiving a text message, the cardholder will now be able to authenticate a payment through their banking app by just using their fingerprint or even facial recognition. When the transaction goes through the «challenge flow» and authentication fails. SCA has some options to improve conversion by leveraging what are called “exemptions.” The first one refers to low-value transactions, i.e. 3DS 2.0 is, in essence, an automated layer of protection against fraud. The EBA has not made any exemptions for the travel industry. The most flexible digital commerce platform that can give your business a real boost. While that may sound appealing, two potential pitfalls could deeply impact revenue: You will be responsible for any fraud-related chargebacks on exempt transactions. To manage these, we are utilizing an up-to-date Bank Identification Number (BIN) database to identify issuers based outside of the European Economic Area (EEA) or transactions that use anonymous cards. where one of the players – either of the payer or the payee – is based outside of the EU). Steps 1 & 2. ↩. With this incremental approach, merchants will fully support EMV 3DS 2.2 by the 31 st of December 2020. So, to conclude, the authentication process provides a better user experience, is mobile ready, embeddable, and more user-friendly, with static passwords replaced by tokens and biometrics. Now that the basics are covered, here’s how it will look when a customer decides to buy your products, services, or plans with 2Checkout’s support in place. If they do, we’ll go through the new 3DS2 process flow. It is our task as a payment provider to build an ordering engine that adapts and optimizes the use of these exemptions. As a wrap-up, it’s worth noting that we’ve upgraded our checkout pages (both hosted and inline) to support the new European directives. So as part of our ongoing effort to provide insights to help you determine your approach to these nuanced requirements, we’re taking a closer look at some of the factors and forces behind exemptions. If, however, the issuing bank decides that the information provided doesn’t qualify for an exemption, they will send 2Checkout the request to initiate the challenge flow and ensure that authentication takes place. If you obtain an exemption, you also forfeit the ability to shift liability to the issuer. If you are using our APIs, we recommend collecting more customer data to facilitate the frictionless flow. We also expect there will be differences in how national regulators and even individual banks will support exemptions and we are building solutions to help manage this complexity for you. Although these aren’t exemptions per se, they are relevant here and important for merchants to understand. This website is using cookies. In such situations, it’s best to have an alternative solution in place and offer your end-customers the chance to finalize the purchase by using either a different credit or debit card or by choosing an alternative payment method such as iDeal, SofortBanking, or SEPA direct debits. In a previous post, we talked about some of the official exemptions to the Strong Customer Authentication (SCA) requirement that the Regulatory Technical Specifications (RTS) have defined for transactions. This is what 2Checkout also offers. Transactions under 30 EUR will be exempt from SCA. As mentioned above—and it’s so important that it’s worth repeating—recurring transactions are treated as exemptions, as long as the charge is made for the same amount, for the same payee, and the same recurring cycle. With 2Checkout, this process is handled through a retry page that allows the customer to choose from other available payment alternatives to complete the purchase. New and improved 3-D Secure from “Frictionless Experience with Verified by Visa”, a risk-based authentication case study by Visa. If either of these parties is outside the EEA, then the SCA regulation does not apply. While we anticipate some semblance of consensus evolving over the next couple of years, there are certain to be variations in how each issuer decides to handle exemptions in the shorter term. Example of a «frictionless flow» when exemptions are applied. The customer might not have her mobile device close by, or there might be an issue with the bank application or the mobile internet connection. If the customer’s bank believes it to be a safe transaction, the customer goes through the frictionless flow in which she has nothing left to do and the payment is sent for authorization and capture of funds. We’ve also included the new 3DS2 protocol into our APIs and payment pages in a way that is designed to keep changes for merchants at a minimum, and minimize the impact of SCA on checkout conversions. Conversely, in certain markets like the UK where there have been similar authentication mandates in place for some time, the lack of consumer participation in the checkout experience (since 3DS 2.0 allows issuers to authenticate without cardholder involvement) could be jarring and cause for concern -- merchants in markets like this may actually want to take advantage of a feature that allows them to request that the issuer initiate a challenge. The next steps of the purchase (Step 3 and 4) happen within the mobile banking application. Other more exotic exemptions are whitelisting and secure corporate payments. While exemptions may be a useful tool for certain transactions, merchants should be aware of and consider these risks when deciding whether or not to seek them. The main problem with this process has been the redirect itself, and the fact that the page and the whole process were not optimized for today’s smartphones. The European Payments Council anticipates that “the payer can claim full reimbursement from their PSP in case of an [unauthorized] payment if there was no SCA measure in place and if the payer did not act fraudulently.”.


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