The UK is set to delay its new Strong Customer Authentication requirements to 2021

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In the European Union (EU), PSD2's regulatory requirements for Stronger Customer Authentication (SCA) for electronic online payments are set to take effect on September 14, but now the UK's Financial Conduct Authority (FCA) is readying to delay its enforcement, per The Financial Times.

For context, SCA requires that consumers confirm their identity using at least two of the following three criteria: something only they know, like a password; something they possess, like a phone; and something they are, like their fingerprint.

The FCA asked a trade group to rework the timeline for its implementation and now the group's plan has been submitted back to the regulator, which is expected to endorse the recommendations next week. Included in those recommendations will be a March 2021 compliance date for technical requirements, followed by another six months to add more advanced authentication.

Here's what it means: If the UK's FCA does approve the delayed timeline for SCA, it could lead to SCA's postponement throughout the EU.

A number of payments stakeholders have raised concerns about the potential consequences of SCA's implementation timeline, but the European Banking Authority did not postpone SCA wholesale. There have been concerns companies would not be compliant by the September deadline and that increased friction would hurt sales, leading to Europe seeing an estimated €57 billion ($63.9 billion) worth of purchase volume abandoned in SCA's first 12 months, according to a study from Stripe.

While the European Banking Authority (EBA) did not delay SCA's introduction across the EU, it did note that national authorities could offer “limited additional time” for implementation, which the UK's FCA is now doing. Other nations could follow suit, and since the report that the FCA is reportedly set to endorse notes that there needs to be an EU-wide solution because of cross-border payments, a broader postponement could be on the way.

The bigger picture: The potential delay of SCA's enforcement changes the implementation landscape for both merchants and solutions providers.

Merchants would be able to avoid the immediate consequences of SCA compliance, but they should move quickly to avoid missing the next deadline and concerning customers. If firms are given a temporary reprieve from SCA they should take the opportunity to become compliant quickly, as the later deadline may hold firm, and effectively updating the payment experience may take time. Also, UK consumers say security concerns would stop them from shopping with an e-tailer, so improving the authentication process is important to securing sales in addition to adjusting for SCA.

Solutions providers offering tools for preparing for SCA may take a hit with the delay, but there's still ample opportunity for them. Both Signifyd and ACI Worldwide are offering tools that can help merchants prepare for SCA. There will likely be less immediate interest given the requirements' potential postponement, but if they emphasize the amount of time it can take to become compliant without disrupting consumers' experience they could still see significant uptake before long.

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