Vendorcom’s Rodgers: SCA will damage European economy

Strong customer authentication (SCA) under the second payment services directive (PSD2) have the potential to create an anticompetitive market in Europe and decimate customer experience in the merchant arena, according to Paul Rodgers, chairman and founder of Vendorcom.

Speaking at Money 20/20 in Amsterdam this week, Rodgers reminded the audience they would soon have 100 days left until the September 14 enforcement deadline for SCA. “I’m not going to comment about whether it’s politically motivated or not, but I’m certain that it lacks market understanding,” he said. “The consequences I’m seeing, particularly in the merchant payments arena, we are regulating towards an uncompetitive economy in Europe for ecommerce. There’s a potential that this regulation will create an anti-competitive market in the merchant payments arena.”

Rodgers warned there would be deep economic damage to the European economy as a whole, as well as to national economies across the European Economic Area (EEA).

“I’m saying that this is a little bit like GDPR. But if you were not compliant GDPR you could cross your fingers, go and hide under a table and if you hadn’t been breached you would have no consequences whatsoever. With the regulatory technical standards for SCA if you fail to act there will a direct business loss in September. Current estimates are that between 25% and 30% of transactions will be declined. Very few businesses, particularly ecommerce-only business can sustain that.”

According to a June report from payments firm Stripe, SCA could cost European businesses around €57bn over the first 12 months of its go-live. In a survey accompanying the research, 73% of consumers are unaware of the new authentication requirements, while 54% said they believed one-time passcodes to be the most effective method of security.

The second version of 3D Secure, known to consumers of Visa and Mastercard under the brand names “Verified by Visa” and “Mastercard Secure Code”, complies with SCA standards. According to the Stripe report 25% of businesses are unfamiliar with it, while 24% of those who had heard of the system planned to implement it only after the September deadline.

“We’ve got this dilemma of compliance to regulation that not suit our market,” said Rodgers. “Customer experience will be decimated if we continue on our current course as a direct result of this regulation.” The Vendorcom chairman called on regulators and banks to collaborate in the time remaining.

“We’ve only got 100 days to go. We’ve almost wasted the last three years since this was first talked about, it’s time for banks and regulators to come together to work on how they’re going to help us avoid the cliff edge we’re facing.

“I’m calling for a transition period beyond September 14. I don’t know how it’s going to happen, because this is law. It’s impossible to redo this in law across Europe, never mind in each of the individual countries. Only regulators have the power to stimulate this. If the banks were to come together it would appear collusive.

“Regulation can be our friend and drive innovation, so the payments and financial services must collaborate with regulators way before the regulation hits statute books. It has to be responded to. That’s our responsibility.”

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