Financial Conduct Authority in UK delays introduction of Strong Consumer Authentication rules

The UK’s Financial Conduct Authority has confirmed a delay to the enforcement of stronger payment security standards to give firms more time to prepare.

Earlier this month, the EBA paved the way for some firms, on an „exceptional basis”, to get an extension of the September deadline for new Strong Consumer Authentication (SCA) rules for e-commerce transactions. The regulations demand a two-step verification process be implemented for all online purchases over EUR30.

The rules, which are being pushed through under the PSD2 Directive, have faced strong opposition from a market which is widely seen to not be ready for the switch.

In a statement, the FCA says that „In response to concerns about industry’s preparedness and ability to comply with the requirements for SCA, the EBA’s opinion allows the FCA to give some firms extra time to implement SCA.”

„The legal deadline for complying with the Regulatory Technical Standards on Strong Customer Authentication remains 14 September 2019. However, the FCA recognises the challenges in meeting this deadline and has been working with the industry to develop a plan to migrate the industry to implement SCA for card payments in e-commerce as soon as possible after this.”

Next steps

The FCA aim to quickly agree a plan with stakeholders across the industry that encompasses a blueprint for compliance and readiness, a timetable for achieving this, and key milestones and targets to deliver improved security of customer authentication and fraud reduction along the way. The FCA will work in close cooperation with all the industry stakeholders and other authorities, including the Payment Systems Regulator, to ensure delivery of the blueprint at pace.

„Once the group has finalised the plan and we have agreed it, we expect all participants to meet the agreed milestones, targets and final delivery date. We believe this approach is proportionate. We will not take enforcement action against firms if they do not meet the relevant requirements for SCA from 14 September 2019 in areas covered by the agreed migration plan, where there is evidence that they have taken the necessary steps to comply with the plan.”

Angus McFadyen, partner, Pinsent Masons says the FCA’s reversal continues the regulatory recognition of the adverse impact these rules could have.

„Consumers will see a real impact on their day to day spending experience and no one is communicating with them to explain this,” he says. „Equally, the regulators haven’t been able to address some of the other unintended consequences such as the possible adverse impact on the innovative overlay services, like money management apps, that law makers have been supporting.”