UK online shoppers face more identity checks as new anti-fraud rules come into force | consumer affairs

Online shoppers in the UK can expect more identity checks – and likely more card refusal reports – in the coming weeks as retailers prepare for new anti-fraud rules coming into effect on March 14.

Shoppers are already seeing more requests to verify their ID as payment providers and retailers adopt the new Strong Customer Authentication (SCA) rules.

According to the changes, before a retailer can accept an electronic (online) payment, they must verify that the customer is who they say they are. The measures are similar to those that people already use to register for online banking.

While most low-value retail purchases continue to be made with controls in the background, shoppers buying higher-priced items online must enter a password, PIN or one-time passcode received via SMS or landline, or log in log into their banking app and approve the purchase.

The rules, introduced by the Financial Conduct Authority (FCA), were due to come into force a year ago but have been postponed to give retailers more time to adapt. The legislation came from European Banking Authorityand was incorporated into British law before Brexit.

It applies to debit and credit card purchases and will have the greatest impact on those making what are considered the riskiest purchases. The new rules don’t apply if you buy something over the phone.

Purchases that are high in value, outside of a shopper’s normal spending habits, or made on a previously unused device are likely to result in an additional security check.

Mastercard estimates that approximately 25% of online transactions after March 14 will require additional verification by the customer. To date, only 1% of online purchases have prompted a password or something similar to be entered.

According to EU regulations Payments under €30 (£25) are considered of little value, but there are exceptions which mean that not all spending above this level will result in SCA.

Likewise, multiple low-value payments could result in a verification request.

If you’ve already noticed, it’s because card issuers started rejecting some non-compliant transactions on January 18th as part of the “ramp-up” phase of full implementation of SCA.

There have already been some isolated reports of declined payments. Ahead of Christmas, the FCA warned in an update that merchants who are unable to fully comply with anti-fraud requirements “risk their customers’ online transactions being refused”.

Jana Mackintosh, General Manager for Payments at UK Finance, which represents the banking industry, says: “Fraud is a growing problem with criminals stealing more than £750m in the first half of 2021 alone. For this reason, it is more important than ever that additional protective measures such as SCA are put in place. For retailers, implementing SCA gives customers peace of mind that payment processes are more secure.”

In 2019, the consumer group Which? warned that those without a cell phone or signal at home risk being disenfranchised by the changes.

The FCA seems to have taken this into account and has told payment service providers that they expect them to develop SCA solutions that work for all consumer groups.

“This means you may need to offer your customers several different authentication methods. This includes methods that don’t rely on cellphones to accommodate consumers who don’t have or don’t want to use a cellphone.”

The relatively small group of people who shop online but don’t use a cell phone must choose to verify their identity in other ways. Those who have a smartphone but can’t get a signal at home should download their bank’s app, which works over WiFi.

The nationwide building society is typical in that it has told its customers who don’t use its banking app that they can choose to receive a code by texting a landline or through their card reader and debit card.

It has advised customers to ensure it has the correct mobile number, email address and landline number “so that you receive any authentication codes we send quickly and are not interrupted when shopping online“.