FCA updates guidance on Authentication rules

The UK’s Financial Conduct Authority has this week updated its guidance to firms seeking to meet the new Strong Customer Authentication (SCA) rules.

On Wednesday (5 February 2020), the FCA updated its SCA guidance (available here). It confirmed that companies have until 14 March 2020 to implement the new SCA rules for online banking and that the implementation dates for SCA remain in place, despite the UK’s withdrawal from the European Union on 31 January.

In other payment areas, the regulator has already promised not to take enforcement action against firms until 14 March 2021 if they have been unable to meet the requirements, as long as they can show they are taking steps to do so.

The decision to permit a phased approach was announced in an FCA media statement in August 2019. It followed concerns raised by the European Banking Authority that more time may be needed for firms to meet the requirements which are designed to reduce fraudulent transactions.

In a statement at the time, Jonathan Davidson, Executive Director for Supervision, Retail and Authorisations at the regulator said it was important they got the balance between fraud and disruption correct.

“While these measures will reduce fraud, we want to make sure that they won’t cause material disruption to consumers themselves. So, we have agreed a phased plan for their timely introduction.”

Merchants have already been warned to expect to witness some grumbling among consumers following the SCA’s introduction. A report in the Daily Telegraph on Thursday (6 February) states that if consumers have made contactless payments totalling €150 since they last used their chip and pin function, they will now automatically have their contactless payments declined until they re-enter the pin.

Despite this, the new rules largely have the backing of industry. In August, UK Finance, the trade group representing lenders and payment providers, said the phased implementation of the SCA rules was a sensible approach.

“We would encourage anyone concerned about their ability to verify online payments to speak with their bank or provider, to ensure their contact details are up to date and discuss what alternatives may be available,” said Eric Leenders, managing director of Personal Finance at UK Finance.

“The banking and finance industry has worked closely with the FCA, retailer groups and other stakeholders to deliver these required changes in a way that minimises any disruption for consumers and businesses. We want to ensure that the convenience of making an online payment is balanced with these increased security standards.”