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How changes in retail law could affect customer experience

New payments regulations could increase the amount of times customers will need to use two-factor authentication to make a purchase, potentially putting a strain on customer experience, according to MasterCard

New regulation surrounding payment authentication could make it more difficult to offer a seamless customer experience, according to MasterCard.

The financial services provider said the Second Payment Services Directive (PSD2) will mean that a higher percentage of people will be asked to authenticate their payments when purchasing goods online, which could lead to more interruptions in the shopping process and lead to an increase in abandoned baskets.

According to David Jones, business development at MasterCard, customers paying by card online are currently asked to authenticate their payments approximately 2% of the time, but this is set to increase to around 25% after new regulations come in.

“When that happens, card holders often don’t know their password and it leads to an abandoned purchase,” he said. “There’s going to be a big shift in consumers experience when buying things online.”

There has already been an emphasis on the importance of improving the digital customer experience for banks, especially as the number of people visiting branches is in decline, with customers becoming more fickle.

But as fraud is much higher online, PSD2 aims to protect consumers by requiring authentication through a combination of “something you know, something you are or something you have”.

While MasterCard said people’s mobile phones will become the most common “something you have”, customers are often asked for passwords or security questions as their “something you know”.

Passwords can present a problem for consumers, with many often forgetting passwords or using something that is too simple, and younger consumers said they would prefer to use biometrics over passwords.

To ensure a good customer experience stays intact, MasterCard predicts an increase in the use of biometrics when looking for payment authentication.

This could be in the form of the biometric capabilities already offered with some smartphones, such as fingerprint readers or facial recognition technology.

“[Customers] expect to buy something and for it to be easy, they don’t expect to have to jump through hoops,” Jones said. “Customer experience is a key competitive advantage.”

Using biometrics could also become an important use case in customer support, MasterCard said, as this is another instance in which consumers are asked for a security question or password.

MasterCard has developed a prototype payments card with an inbuilt biometric thumb print reader which will act in a similar way to Apple Pay when used for contactless payments at a physical checkout.

Similar technology has been tested by biometric tech firm Zwipe, and many other banks and payment services have been slowly adopting biometric authentication methods.

In 2014, Barclays announced plans to use voice biometrics for authenticating customers calling the bank, – which is something it has been using for select customers since 2012 – and launched biometric vein readers developed by Hitachi, known as VeinID.

In early 2018, MasterCard set a deadline of April 2019 to make sure banks that accept MasterCard payments will allow consumers to use biometric identification.

Read more about biometrics

  • Consumers are becoming more comfortable using biometrics to pay when shopping, with fingerprint payments proving the most popular biometric identification method.
  • The long-awaited government biometrics strategy falls short of the mark, say critics, failing to provide a detailed and coherent strategy or governance framework.

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