What is SCA and how does open banking help?

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SCA, or Strong Customer Authentication, is a security measure that has been implemented in the European Union to help protect consumers from fraud when making online payments. SCA requires two or more factors of authentication to verify the identity of the customer when making a payment, such as a password, fingerprint or facial recognition, and a unique code sent to the customer’s phone or email.

How it’s made possible

Open banking is a concept that allows third-party providers to access financial information from banks and financial institutions, with the customer’s consent. This is made possible through APIs (Application Programming Interfaces) that allow the transfer of data between different systems. The aim of open banking is to increase competition and innovation in the financial sector, by allowing customers to access a wider range of products and services.

So how do these two concepts relate to each other? Open banking helps to facilitate SCA by providing the necessary infrastructure for third-party providers to access the customer’s bank account information and initiate payments on their behalf. This means that when a customer makes a payment through a third-party provider, SCA can be performed by the provider, without the customer needing to interact with their bank directly.

For example, if a customer wants to buy a product from an online retailer using a third-party payment provider, SCA can be performed by the payment provider, without the customer needing to be redirected to their bank’s website or app. The payment provider can use the customer’s bank account information to initiate the payment and perform the necessary authentication checks, such as sending a unique code to the customer’s phone or email.

Biometric authentication

Open banking also helps to increase the security of online payments by allowing customers to use a wider range of authentication methods. For example, a third-party provider may offer the option to use biometric authentication, such as fingerprint or facial recognition, which is often more secure than a password.

In addition to increasing security, open banking can also help to improve the customer experience by making payments faster and more convenient. With the customer’s consent, a third-party provider can initiate a payment on their behalf, without the need for the customer to manually enter their payment details. This can be particularly useful for customers who make regular payments, such as utility bills or subscriptions.

Overall, SCA and open banking work together to provide a more secure and convenient payment experience for consumers. SCA helps to protect customers from fraud by requiring additional authentication checks, while open banking allows third-party providers to access the necessary information and perform these checks on behalf of the customer. This not only improves security, but also makes payments faster and more convenient for customers, ultimately leading to a better overall payment experience.