Lack of SCA readiness is ‘poison in the water’

Organizations who have failed to prepare for the Strong Customer Authentication (SCA) requirement under Europe’s second payment Services directive (PSD2) face losing potential partners and suppliers, according to Louise Beaumont, co-chair, Open Banking Payments Working Group, techUK.

“For those organizations which need to seek extra time, I think this is poison in the water of their ecosystem. They prove to their partners, suppliers, and other members of their ecosystem that they are not good enough. Those members of the ecosystem will look to work with those organizations which are ahead, which are compliant, and are doing the right thing for their customers,” Beaumont said on the sidelines of Bottomline Technologies’ breakfast briefing on the future of payments.

“My concern here is that this is the EBA potentially giving organizations that haven’t worked hard enough to get on the front foot more time. There are some advantages for those organizations who are ahead of where they need to be, who are delivering well, this is their chance to absolutely seal that advantage. For those organizations who are not where they should be, this is a real warning sign for them,” she said.

On June 21, the European Banking Authority published an opinion on the elements of SCA under PSD2.

The EBA acknowledged the complexity of the regulation, particularly for non-payment service providers (PSPs) such as e-merchants, and that “on an exceptional basis and in order to avoid unintended negative consequences for some payment service users after 14 September 2019, National Competent Authorities (NCAs) may decide to work with PSPs and relevant stakeholders, including consumers and merchants, to provide limited additional time,” the statement read.

“This is to allow issuers to migrate to authentication approaches that are compliant with SCA, such as those described in this opinion, and acquirers to migrate their merchants to solutions that support SCA, “it continued.

However, NCAs who wish to remain at the forefront of financial services will not allow a push back in the timeline, according to Beaumont.

“My sense is that those NCAs that have a systemically important financial services industry and want to be at the forefront of that going forward will say, ‘no, actually we are holding the line, we are not letting you off,’ because they recognize that it is crucially important for future competitiveness on a global basis. Those NCAs who are not world leaders in financial services, who are at the backwater of it all will probably continue to let their financial services industry languish,” she said.

For Beaumont, a long period of denial has been followed by panic as the lack of adequate technology adoption has begun to set in.

“Banks are made of products and product people, the era of being able to push a big dumb product, and market it to your consumers without consideration is dead. We are in the world of live, data enabled service now. There has been a very slow wakening up of people who don’t come from this natural background to understand what is being asked of them, and then they get a vast sense of vertigo when they realize what they need to achieve and in what time. They have underinvested in technology for decades, they are playing catchup and they don’t have the DNA to do it,” said Beaumont.

According to research conducted by Bottomline Technologies, 53% of businesses said they had already adopted real-time payments.

Earlier in a panel discussion, James Hodgson, head of domestic payments at RBS said he believed total adoption of real-time payments wouldn’t happen for a while despite the figures.

“Yes, we see real-time payments starting to grow, but I think we are a long way from the tipping point at this stage,” said Hodgson.

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