Strong Customer Authentication (SCA)

Strong Customer Authentication (SCA) is an essential element of the Payment Services Directive 2 (PSD2) regulation introduced by the European Union. It is designed to enhance the security of electronic payment transactions and protect customers from fraud.

Here are the key aspects of Strong Customer Authentication (SCA) within PSD2:

1. Multi-Factor Authentication: SCA requires the use of at least two independent factors from the following categories for authentication:
  - Knowledge: Something the customer knows (e.g., password, PIN).
  - Possession: Something the customer possesses (e.g., smart card, mobile device).
  - Inherence: Something inherent to the customer (e.g., fingerprint, facial recognition).

2. Dynamic Authentication: SCA mandates the use of dynamic authentication methods that generate unique and unpredictable authentication codes for each transaction. Static, reusable codes or passwords are not considered sufficient.

3. Risk-Based Authentication: PSD2 allows for certain exemptions to SCA when assessing the risk associated with a particular transaction. Low-risk transactions, such as low-value payments or transactions deemed low-risk based on predefined criteria, may be exempted from SCA. However, additional authentication may be required for high-risk transactions.

4. Strong Customer Authentication Flow: SCA requires a specific authentication flow during the payment process. Customers must authenticate themselves using the prescribed multi-factor authentication methods before completing a transaction.

The aim of SCA under PSD2 is to reduce the risk of fraud in electronic payment transactions, increase customer confidence in digital payments, and provide a higher level of security for customers' financial data. By implementing SCA, payment service providers and merchants can ensure compliance with PSD2 regulations and contribute to a more secure payment ecosystem.

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