What is Strong Customer Authentication(SCA)?

Strong Customer Authentication (SCA) is a new European regulatory requirement to reduce fraud and make online payments more secure. In order to achieve this the EU has put forward 3 methods of authentication:

• Something the customer knows(e.g PIN code, Password)

• Something the customer has ( Mobile phone or other physical devices)

• Something the customer is (e.g Biometrics: fingerprint, face recognition)

In order payment to be accepted authentication has to be carried out via 2 of the above-mentioned elements.
Here is a real-life scenario: Customer wants to buy sneakers from an e-commerce shop. According to the new rules at checkout, he would need to approve the transaction — for instance by receiving a push notification from their bank or scanning their fingerprint on their smartphone bank app. Failing to do so would result in a rejected transaction.

Exemptions

We should mention that certain payments would be exempted from the SCA

• Low-value transactions that total less than 30 Euros. This is limited to 150 euros, meaning that after 5 transactions you would still need to do authentication.

• Recurring transactions – Merchants offering subscription must apply SCA on only the first transactions, as long as the following charges are for the same value.

• Trusted Beneficiaries or merchants that are whitelisted by a consumer.

How does it affect my e-commerce store or online business?

Ultimately the responsibility of SCA would fall to the shoulders to the banks and the payments service provider (PSP) that supports your online store.

However,  that does not mean you won’t be affected.  The single biggest thread is the drop in conversion rates in the short term after 14th September. Shopping cart abandonment are already one of the biggest challenges in the business.  If a customer needs to do a few extra steps to complete their purchases or his transaction is constantly declined: it is likely that some of them would leave the site prematurely. That would result in big overnight loses

‘’Europe’s Online Economy is set to Lose €57bn from SCA” 451 Research  Report

The fact is that Europe is not a pioneer in such type legislation. Back in 2014 India enforce similar legislation.  Some businesses reported an overnight conversion drop of over 25 per cent overnight.

Despite the short-term troubles, Strong Customer Authentication (SCA) would have a positive impact on the long term. The regulation would battle the fraudulent transactions.  Businesses are likely to see fewer customer chargebacks and hence potentially a drop in operating costs.

How to prepare my online business for SCA?

Now that we know that SCA could have a significant effect on your online business, here are some steps that you could take to make sure you are adequately prepared:

• Start Early: SCA would enter into force from 14th September, the earlier you start preparing the better. Everybody will be flocking to their bank and PSP at the beginning of September, so evade the queues.

• Contact your Payment Service Provider and ask him about how is he preparing for the SCA.  He would advise and guide you if you need to update any software.

• Research what products that your PSP offer. Many big PSP like Stripes, Adyen etc offer complimentary products and API’s to mitigate the risks of SCA.

• Examine your customer journey,   make it as frictionless as possible. (See picture below)

• Take advantage of the exemptions listed above.  The online business who could enforce as the minimum allowed authentication as possible would have a generally competitive advantage. The problem is that acceptance depends on customers bank and card networks. It would be hard to negotiate with them, so the PSP again may be your go-to place.

The Strong Customer Authentication (SCA) would affect a lot of online transactions in the EU starting in September 2019. Although it would bring some short term pain to online businesses, it would address the issue of billions of Euros lost in frauds. By timely following some of the steps above, you would probably evade a big drop in sales overnight.

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Revolut

Revolut is one of the fastest growing and well-known fintech companies. What started as an app for money management allowing to send, receive and spend money has grown into one of the leading European mobile banks. For 3 years the company managed to attract 4 million users and reach a valuation of $1.7bln.  Mobile lays in the heart of its successful business model. It is considered as one of the best fintech apps. Some of the features that put them ahead of the competition are:

Fast onboarding:  The team at Revolut did not only focus on creating cool looking mobile app but one that you could start using as quickly as possible.  It is important to remember that 21% of people use an app only once and then abandon it (Localytics, 2018). One of the reasons is the poor onboarding experience. Revolut however, has a fast sign-on process with a minimum need of information that you could complete under 2 minutes. Compare that to the traditional bank where you’d need to fill in lengthy forms to open your account.

Great Visual Language:  The design team knows their target customers well: the millennials(people under 40. Colours are fresh and vibrant away from the corporate grey of HSBC for example.  Other small touches are the emojis and GIFs in transactions and messages. Although the millennials are tech-savvy: Revolut has also world class UX: the app is easy to navigate and work.

Full control: Customers can decide themselves what level of security they prefer. For example, the user can turn off NFC functionality, block online payments or freeze your card etc. And also unfreeze at any time very easily. This puts the user in control and builds loyalty.

Mint

Mint is one of the forefathers of personal finance management and budgeting apps. It is a classic success story and role model for many.

Security:  Lack of consumer trust is one of the biggest problems in front of fintech app adoption.  If you want to have access to your user financial information, security should be high on the priority list.  Mint protects the sensitive data in a separate database using multi-layered hardware that matches the security standard of banks. All of your data is encrypted with a 256-bit encryption level and the data exchanged with Mint is encrypted with 128-bit SSL. Furthermore, they do a great job explaining to the user on the homepage of their website and in the app that their data is at safe hands.

User engagement and retention: There is a high chance that even downloaded your app is going to be used only once. Mint tackles this problem by sending the right messages at the right time with the right content. For instance, events like withdrawing for ATM would trigger a push notification or email to users to inform them. It goes one step further and in the same message offers you information on how to refund your ATM fees. Suddenly as a user you see more value in the product and your loyalty increases. Furthermore Mint also send recurring messages with an overview of how you spend your money.

3.Yulife

YuLife is a kid on the fintech block.  Their app offers life insurance plus wellbeing tools for businesses and individuals.  Yulife’s aim is to “create lasting, positive lifestyle changes by rewarding simple, everyday activities through insurance and game-based app.

Gamification at its finest:  The app uses some of the perks of your phone like pedometer combined with different game challenges to encourage users to collect their unique wellbeing currency called yucoin. The more users do healthy things, like walking the more yucoins they earn to spend in places like Asos, Amazon, Avios etc.

The app uses an underlying human need: the need to play. Gamification is a huge opportunity and still somewhat underestimated by many fintechs as a viable way to increase user engagement. Some behavioural experts claim that we use super successful apps like Uber not only because of the convenience factor but also because it represents a mini-game: seeing how the driver comes to you on the map etc

These are only 3 examples of the best fintech apps out there. When planning your app you could consider some of the features outlined above that could give you a competitive advantage.
If you are a fintech entrepreneur looking for an experienced design and development team: drop us a line
You could also find us on the Eastern Europe Software Development Company directory.

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Gamification

The millennials grew up spending hundreds of hours on  PlayStation and Nintendo. That inevitably influenced how they interact with new stuff.
Gamification is the use of game design techniques and mechanics in a non-game context to solve problems. In the context of fintech apps, gamification could increase user engagement. You could add simple things like prompting users to set goals (e.g saving X amount) and reward them upon achievement.   If they receive meaningful rewards for their engagement, it could also increase their customer loyalty .

Onboarding

Onboarding is an underestimated part of the app experience. It is literally the first impression that your users have with your product and as the old saying goes first impressions matter. Fintech apps due to their nature, have usually lengthier onboarding process than apps in other categories. There is plenty of data that needs to be collected and that is a double-edged sword. On the one hand, too lengthy onboarding may turn off millennials from using your app, on the other hand too short one would rob you from the chance to collect data, engage them and explain the basic terminology or functionality.  A good example is Acorns: a spare change investing app. Not only it is stunning visually and easy to follow, but it does a good job of explaining what is the app really about in the first 30 seconds. Good practices that you could take home from them: use story-telling to emphasize the value of your product, ask only for the necessary information and prompt users what to do next on each step.

Clean UX/UI

The best fintech apps are the ones that are easy to understand at one glance. You could use different graphs, charts to transform complex financial data to be easily readable on a mobile screen
Another important aspect are the colours. Some studies show that 60% of consumers decide on a product based on colour alone. Another study by  ComScore   in 2017 showed that 21% of millennials would delete an app simply because they don’t like how it looks. Usually, finance and money are perceived as serious subjects and are portrayed in more conservative colours. Although it is a matter of personal taste, millennials generally prefer colours that convey more mindful and optimistic vibes.

Focus on the Ecosystem and brands

Lastly, focus on building an ecosystem around your app and product that would add value and make it useful.
How many savings, payments or banking apps the world and millennials really need?  The answer is probably less than there currently are. “We don’t need another fintech app frankly,” said Satya Patel, a partner at Homebrew Ventures at the Future of Fintech conference in NY back in 2017. Millennials value practicality and convenience above all, so focus on building something that would be useful in different ways.Build  a real challenger product  rather than another shiny mobile app.
A good example is Starling bank and its in-app marketplace that integrates with dozens of other services. On top of its main functionality, there is another whole layer that allows users to look after their travel insurance, pensions etc. That really sets the Starling bank apart from other challenger banks.

Fintech, millennials and mobile is a match made in heaven. However, it is a crowded marketplace. You would have to carefully study your audience and opportunities before releasing an app.
If you’re looking for an experienced app development partner, then Payapars is right for you.

The post The Fintech Millenials Battle: How to Create that Wins Their Hearts and Minds. appeared first on Payapars.

Push Notifications:

According to Google, 92% of users find Push notifications on financial apps useful. Research from marketing automation platform Kahuna also suggests that financial services notifications have a higher user engagement than other industries. Furthermore, Fintech apps could take advantage of the fact that they can reach a higher level of personalisation than many other industries. A good example is to implement event-linked notifications: for example, notifying user that his account savings are running low. Done on a timely manner and targeted at selected user base, such push notifications could boost app engagement and enhance the customer relationship.
Push notifications could be used to promote new services and promotions. Important to note that they have a character limit so you should include a clear message and USP(Unique Selling Proposition) Marketing experts also advise in order to get noticed try to add a human touch e.g use emojis.

App Store Optimisation

Often neglected and overlooked source for organic app downloads is the App Store Optimisation or how well your app ranks in the search results. Although Google and Apple do not share how they construct their search algorithm, there are a few basic steps that can put you ahead of the pack. Firstly, choose the right keywords that are relevant to the app. You could also include your most important key word in the title. According to some studies, it can increase app store ranking by as much as 10%.
App description should also be kept user-friendly e.g use bullet points to outline important features, always add update notes. Additionally, think about your customer’s location and provide the translated description and title. Finally, screenshots that show the app best features and also create eye-catching app icon.

Go beyond the Store

Once you have your app well placed on the App Store, you could use all other online and offline channels at your disposal to promote it. Make sure your Facebook and other social pages are optimized for mobile viewing and they include easy links to your mobile app.You could use mobile browser detection on your website to detect users who enter the site on a mobile browser and include message that a mobile app is available.

The Finthech revolution has made the mobile financial app space more and more competitive. However, by offering a good service, having the right marketing mix and following the basic principles from above, you should be up for success. You could read our post about technical tips on building financial mobile apps here, and if you are planing to develop a financial mobile app, we would be here to help. Get in touch!

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Security

When handling somebody’s finances security comes first.
It is very important that your application handles data in a discrete and simple way. Always maintain your customer’s information in a database. This way it will be well organized and the chance of data inconsistency decreases.
Encrypt the database with a combination of a PIN code or fingerprint that the user has to enter when opening the application: if someone else opens the phone or the app he won’t be able to get any information until he knows his PIN code. Even if the database is downloaded and brute forced if the PIN code is strong enough and you put salt in the algorithm, the user’s information will be safe. Biometrics(facial recognition, fingerprints, or voice recognition) is also really fast and effective because it generates a unique hash code which serves as a PIN code but is even more complex. In the coming years, these technologies would become more and more common and preferred choice for authentication.

Another idea to safeguard your users from potential fraudsters is to use one time QR codes for each user login but this is useful only for first-time logins because the user has to be in front of another device he has already authorized for the platform.
Keep track of the devices the users link their account to. Authorize the devices explicitly.

If your platform supports making transactions or some actions that require additional security and authentication, use an algorithm for a one-time password. You can think of this algorithm as the security tokens that banks issue. Actually, the way they work is identical.

Last, but not least, data consistency is vital when creating financial applications. If the data is inconsistent or not up to date you should always warn the user so he/she knows what information he is looking at.

User Experience and User Interface

There are some elements in the design of your app that you should take into account. Firstly simplify the user journey: filling long forms and fields with required information on a desktop computer with mouse and keyboard could be perfectly fine, however doing it on a 5-6 inch mobile device could be intimidating and could scare new users away.
On the other hand, Linear UX with a specific beginning, middle, and end that allows users to complete one action with each step.

The best way of displaying financial data as we all know is with charts. Always know what information you are trying to display so you can pick the right chart for the visualizations. For example, the best way to display a monthly bank statement with a chart is maybe the line chart. You can maybe combine it with a bar chart so you can split the spending per categories (Eating, Utilities Taxes etc.) However don’t go over the top: simplicity and comfort are key, too many charts or flashing graphics would likely distract users rather than help them focus on the content

Notifications and User Interaction

Notify the user for every important event that happens with his/her account. After all, it’s people’s money we are talking about here. This can be easily achieved with Firebase provided by Google. Don’t forget to always leave an option to stop this feature.
Another handy feature for better interaction with users would be the implementation of chatbots: users could get an answer of most of their technical or financial questions rather having to transfer to other channels e.g phone for getting support.

In the world of mobile communications, it is mandatory to have your platform running in people’s pockets. Building a cool and functional app could help build your brand and foster customer loyalty in ever more competitive fintech marketplace.

You could check how we helped a Danish fintech company with their app.

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Bill Gates, 1990

We have seen an enormous advance in media technology and communication still banking has been lagging in the innovation sector. This is about to change, however, and the wind of change blows from an unexpected direction: the European Commission. Next years is the year that the new Payment Service Directive 2 will come in force and is going to radically change the banking sector and end the bank’s monopoly on customer’s account information and payment services.

Disrupting Payments in Europe

PSD 2 further extends the original Payment Service Directive from 2007. The key change that PSD2 brings is that it requires banks to provide information about their customers’ bank accounts to third parties via Application Programming Interfaces (APIs). Customers can thus grant third-party service providers access to their bank accounts.
It enables bank customers, both consumers and businesses, to use third-party providers to manage their finances. What this would mean for the everyday consumer is that instead of using a card, consumers will soon be able to pay directly from the mobile app of their favourite brand. I Usually when you shop on Amazon, for example, your payment is processed through payment intermediary(usually card company) who charges the seller for its services.

More opportunities for businesses:

Start-ups are already taking advantage of the possibilities that the directive would unveil.
London based company True Layer creates a developer platform to make it easy for Fintech companies to access bank APIs. It has raised $3 million Series A investment.

“We believe that PSD2 will be a once in a lifetime opportunity for startups to displace incumbent banks and financial service providers,”

says the startup’s co-founder Francesco Simoneschi.

The API’s enable a lot of other opportunities for Fin-tech Startups. FinTech companies can plug into payment accounts and either initiate payments or retrieve account information. Banks cannot demand contracts and cannot charge fees.
Start-ups in other areas could also benefit from the changes. For example, a utility company can create an app that checks your electricity usage and automatically transfer funds from your savings account to your bills account.

Retailers would be another beneficiary. Under PSD 2 retailers could ask consumers for permission to use their bank information and draw money from their account directly whenever the consumer wants to make a payment. In other words, retailers establish PISP((Payment Initiation Service Providers) services to their customers eliminating the middle-man and fees. Reducing these costs could make a significant difference to a merchants’ bottom line. Customer usage of these PISP services may be encouraged through the provision of discounts or other loyalty schemes at the point of sale.

Opportunities for banks:

Banks invest billions in IT every year however most of it goes for maintenance. By opening their API’s and the entrance of new players in their domain, banks would need to catch-up with the payment revolution or stand the risk of losing part of their customers. There are several directions that banks could take:

• Move to a bank as a platform strategy: offer a 3rd party or build their own applications and create eco-system around itself. The good example is Unicredit’s BuddyBank app.
  Buddy back will offer conventional banking products, such as accounts, credit and debit cards, and loans, as well as lifestyle services such as restaurant and travel reservations.
  Buddy back is being built on a lean, stand-alone architecture, which will allow for fast, low-cost expansion and could quickly and easily provide banking services through connections with partners.
  Another example: transaction platform with business-financial-management applications and equipped with features such as liquidity dashboards, electronic invoice-processing, and loan management. Banks to offer those own tailor-made, high margin products to their competitors’ customers.
• Cross-sell services: Banks to hold key data which with the consent of the user they could provide to 3rd party providers. That would include for example income, purchasing history and debt repayments and could help those companies tailor unique offerings. For example, knowing your credit history a travel agency could offer you better suited holiday packages.
  Banks could also partner with fin-tech Startups to deliver digital financial innovation.

The road ahead

By breaking from the current banking monopoly, the payment services market will benefit from increased innovation and free-market competition. In the path to innovation, time is the essence, and first movers are likely to dominate the market. This is also true for the current implementation phase of PSD2. No matter on which side of the fence you stand: bank or company, the right time to experiment with and test new ideas and products is now.

Sources:
GFT; Accenture; PWC

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