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How Issuers can make SCA smoother with wearable tech

Consult Hyperion, has published a whitepaper that outlines the huge potential of wearable tech as a tool to securely authenticate consumers, and create much smoother contactless payment journeys in a fast-growing range of locations.

SCA smoother with tech

The whitepaper, Authenticating Passive Wearables, explains that with the PSD2 regulation mandating Strong Customer Authentication (SCA) on all payer-initiated electronic payments in the European Union, issuers now have a unique opportunity to simplify and speed up customer authentication using wearables.

SCA requires the payer, or wearable user in this case, to use two factors out of three to authenticate themselves:

  1. Something they know, like a passcode
  2. Something they possess, like a smartphone
  3. Something inherent to them, like a biometric

The introduction of SCA raised concerns about more friction being added to the user’s payment journey, affecting the convenience and simplicity of the wearable experience.

But crucially, the whitepaper makes it clear that supporting SCA on wearables is no harder than supporting SCA on Apple Pay.

Previously, issuance of payment-enabled wearables had been viewed as a difficult process, but today with payment network tokenisation and device personalisation performed by the consumer using their mobile phone, passive wearables are a scalable solution banks can deploy to their consumers.

Unlike active wearable items that depend on battery life to operate, like smartwatches, passive wearable items don’t require a battery, extending their usefulness and ability to be used in a wide range of locations.

Furthermore, the whitepaper also details the straightforward steps issuers can take to easily support SCA on wearables, which are already part of the process for introducing tokenised cards on mobile phones.

The whitepaper also includes important details on the differences between online PIN and offline PIN verification, cumulative contactless transaction limits, how issuers can benefit from delegating SCA to third parties on their behalf, and a checklist of frequently asked questions regarding SCA and various forms of device and user authentication.

“The introduction of SCA in the European Economic Area and the UK has given rise to concerns that the need for users to authenticate themselves makes the user experience for wearables much less attractive,” says Colin Tanner, Co-Founder and CTO of DIGISEQ.

“Understandably issuers may be concerned that any investment in wearables may be affected by a poor SCA experience. Fortunately, a well-designed wearable solution that meets the requirements for SCA will provide users with the convenience of contactless payments plus the security associated with authentication.

Even better, it should strengthen the business case for issuers as the potential exposure to fraud and theft is significantly lower than for mobile payments.

Wearables are harder to steal, and due to the physical separation of the payment device from the management device, more difficult to exploit beyond SCA limits.”

With a market value of $171.38 billion expected by 2032 and a projected growth of more than $150 billion over the next 10 years, the publication of the whitepaper comes at an exciting time for wearables as they break into the mainstream market.


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