As the enemy of conversion, checkout friction is in the crosshairs of players in the sector as more are making moves to apply friction more deftly to comply with regulators and minimize fraud while also growing sales.
On Wednesday (Aug. 17), London-based retail technology firm Checkout.com said it is enhancing its authentication product to help merchants navigate the strong customer authentication (SCA) requirements under the EU’s Revised Payment Services Directive (PSD2).
While SCA and PSD2 don’t apply directly to U.S. businesses, operators here have been watching developments since PSD2 was mandated in 2019 in the European Union and the United Kingdom.
Put simply, SCA demands that businesses have three pieces of data to authenticate a consumer’s identity, often expressed as “something they know, something they own, and something they are” — implying passwords, device-level ID and biometrics.
In its announcement, Checkout.com said changes to its authentication solution come as a quarter of eCommerce companies experience a “significant” increase in fraud and chargebacks. In May, the company acquired digital identity verification startup ubble, whose technology is now part of the platform’s 3D-Secure suite, calling authentication updates a logical expansion of its revenue optimization efforts.
This news dovetails with increased interest and activity around “buy” button checkout options. The PYMNTS “2022 Buy Button Report: Accelerating Checkout Optimization,” based on a survey of over 800 online retailers, found that buy buttons save consumers 148 million hours annually during online checkout.
Even so, many merchants using buy button checkouts are requiring additional identifying information from consumers, adding unwanted friction to what is meant to be an effectively frictionless checkout process.
The 2022 Buy Button report found that “in Q2 2022, 30% of online merchants required online shoppers who check out via buy button to provide personal information to check out as a guest — a striking 182% increase from the 11% who asked for this in Q4 2021.”
Rallying Around One-Click
More FinTechs in the checkout space are pushing the envelope on checkout experience by removing frictions like entering additional personal data. However, this may or may not present problems when such regulations come to the U.S., and for U.S. firms operating in the EU and U.K..
In an interview with PYMNTS’ Karen Webster, Bolt CEO Maju Kuruvilla noted that fraud firms tend to focus on fraud, payments providers on payments and retailers on selling — which has made checkout more friction-filled.
Bolt is “fundamentally bringing all these three together,” Kuruvilla said. “That’s why identity matters. The shopper identity comes together, we store the payment information and enable all different payment options for the identity on the accounts. We are connected with fraud systems behind the scenes so we can manage it end to end.”
Additionally, in late July, Checkout.com’s Vice President of Product Yael Barak told PYMNTS, “Regulation like PSD2 is allowing FinTechs to build that layer of value add on top of traditional FIs [and] the role they still play” in authentication.
Barak also said legacy checkout experiences are a “cobbled-together kind of architecture, whereas when I think about today’s digital-first solutions, I think about stacks that are end-to-end [and] uniform. What I mean by that it’s maybe a combination of microservices that are accessed via APIs.”
In its Wednesday announcement, Checkout.com noted some high-profile players are adopting its streamlined authentication solution, saying, “Businesses including Klarna are already using Checkout’s Standalone Authentication product to streamline their 3DS strategy through one provider giving them greater visibility on performance and where they can optimise their setup.
“Leveraging the solution’s smart optimisations has allowed many to achieve higher approval rates, reduce friction for their customers and ensure authentication requests are compliant.”
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