Published by gbaf mag
Posted on October 21, 2020
7 min readLast updated: January 21, 2026
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By Ed Whitehead, Signifyd managing director, EMEA
The changes that COVID-19 has caused in rapid succession make it hard to slow down and think about just how to approach the retail and payments landscape and a world that will never be the same.
But it is important for retailers and financial institutions to take a breath, think about where consumers are headed and come up with a strategy to take your enterprises there in time to meet them when they arrive. Granted, all this is going on in the midst of great disruption in the world of online payments.
First, ecommerce sales have accelerated at an unprecedented rate. When the World Health Organisation in March declared a global pandemic and government began ordering non-essential stores closed, consumers turned to online shopping for necessities and nice-to-have items.
Ecommerce sales in Europe peaked at 70% year-over-year at the height of online buying during the pandemic, according to Signifyd Ecommerce Pulse data. With non-essential stores reopening and with consumers less inclined to stockpile, online buying has cooled, but ecommerce spending in September remained at double their year-ago figures in some key verticals, according to Signifyd Ecommerce Pulse data.
That shift was unforeseen before the pandemic hit. But another disruption was long-anticipated and human-made. By the end of the year in most of Europe, merchants and banks will be required to adhere to the payment regulation known as PSD2 and it’s requirement for Strong Customer Authentication.
And while the UK has pushed enforcement of the regulations into 2021, the earlier enforcement deadline will apply to UK merchants who want to sell into the rest of Europe.
Interestingly enough, most of the worry over SCA has focused on whether merchants were ready for the change. But financial institutions also have work to do to prepare for SCA, both to serve their consumer account holders and to process transactions from their commercial customers, such as retailers. And while conventional wisdom has dictated that financial institutions are in a better position to offer SCA than are many retailers, a recent survey by Signifyd indicates that assessment might be overly sanguine.
Survey shows financial institutions need to reach out to customers
The September survey of 1,500 UK consumers found that 41% of respondents had encountered extra steps and complications while accessing their banking accounts in the past year. More than 37% said they had been unable to complete a financial transaction in the past year due to new security factors and 46.5% said they were very or somewhat likely to give up on a transaction that requires two-factor authentication.
Not very heartening results for institutions facing a requirement that customers be authenticated by two of three factors:
Part of the problem could be customer education and communication — or the lack of it. According to the September survey, 74.3% of consumers said they were either not entirely sure how SCA will affect them (34.3%) or that they were not at all aware of SCA and how it will change transactions (39.1%).
These worrisome findings actually point to an opportunity for financial institutions and retailers. JP Morgan notes that with ecommerce sales rising so dramatically, an increasing number of consumers are becoming familiar with two-factor authentication.
Signifyd’s own data shows a sharp increase in the number of online shoppers who had never or rarely shopped online before. The number of new customers buying from merchants on Signifyd’s Commerce Network, for instance, more than doubled in May, compared to pre-pandemic figures. (Signifyd defines a new online shopper as a customer who has not made a purchase from the more than 10,000 merchants on its global network for at least a year.)
The increase in the number of new shoppers arriving online has slowed, but it is still well above a-year-ago figures. And about half the new users trying online shopping return for multiple purchases within 30 days, indicating they are developing new digital habits.
That means banks and merchants have an opportunity to help these new consumers become accustomed to security safeguards like SCA even as they are getting used to shopping online in general. When done right, this early consumer education will ensure that these new shoppers and bank customers will be comfortable with SCA, given that it’s the way they’ve shopped and banked online since the beginning.
New online customers create new opportunities for merchants and financial institutions
Ed Whitehead
So, online transactions are exploding. Consumers who eschewed ecommerce shopping before are becoming regular online shoppers. All good news. But what should retailers and financial institutions be doing to take advantage of the good news — and to make sure that those new online users become loyal customers.
Getting customers comfortable with transacting in the SCA era, of course, is just the beginning. Retailers and bankers want customers to be delighted with their online experience, a standard that is a few notches above “comfort.”
SCA requirements present an opportunity for retailers to fortify their fraud protection with state-of-the-art, machine-learning systems that will provide a better customer experience today and position them to accommodate future changes to payments regulations.
The trick will be to offer a friction-free customer experience while still protecting the enterprise — a feat that will require merchants and financial institutions to look at state-of-the-art technology to power their SCA systems. Consultancy CMSPI predicted that merchants could lose £108.1 billion in annual sales because of new SCA rules.
CMSPI says the new 3D-Secure version 2.0 that provides the infrastructure for SCA transactions will kill 35% of transactions because of technical problems, declined orders and delays that frustrate customers.
But that assumes retailers don’t turn to innovative solutions that improve the performance of 3D-Secure-powered payments systems. The tools are out there as technology companies have been developing solutions to streamline SCA and make the process far more efficient.
Long-term steps for building loyalty among existing and new customers alike
The pandemic and its disruption feel like they will never end. But they will. Retailers will want to be in a position to build on the relationships they’ve initiated with customers before and during the lockdowns and social distancing.
Some of that will be redoubling efforts they’ve made all along. They’ll want to build flawless online experiences. They’ll want to provide intuitive navigation and enhance the customer experience with engaging content, precise personalisation, invaluable customer support, seamless checkout and instant order confirmation.
Beyond that, it will be important that financial institutions and retailers to clearly communicate with their customers so that they know the rationale for SCA and understand that it protects all parties involved in a transaction.
Automated systems can help with many of the initiatives that lead to improved customer experience. AI-powered content management systems, personalization engines and automated inventory control can advance discovery and fulfillment performance. Fraud and automated order management systems that instantly determine the most efficient way to comply with SCA requirements can speed checkout and reduce the chance of cart abandonment.
No question, the COVID-induced upheaval can make planning for the future seem a little overwhelming at times. But retailers that find the mental space to plot the future step-by-step will find themselves in a strong position today and in the post-pandemic future that we all look forward to.
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