New EU anti-fraud rules, due to come in effect on September 14th, could potentially cause confusion and chaos for online shoppers and harm eCommerce. Retailers have told the Financial Conduct Authority (FCA) that the anti-fraud rules could see as many as one in three transactions failing.

Known as “strong customer authentication” (SCA), customers making a single transaction of more than £30 will be required to relay passwords sent to their mobile phone or other devices to complete their purchase.

Multi-factor authentication such as this ensures that electronic payments are more secure and significantly reduces the risk of online financial fraud. However, under SCA, those without a mobile or have poor signal may have to resort to using a card reader or have a message sent to their landline, causing them significant inconvenience.

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In a letter to the FCA, retailers and groups representing shops have said that the resulting confusion “will lead to abandoned purchases, decline of valid transactions and poor customer experiences”.

The letter also said more than three-quarters of small online retailers are not equipped with the necessary software to perform the “two-step verification” method. Predicting that a third of transactions might fail after the measure is implemented, the letter calls on the FCA to allow more time for retailers to ready themselves for SCA.

Chuka Umunna, the Liberal Democrat MP, also called on the Government to grant more time saying he was “staggered the Government is not doing more about this ticking time bomb for online retail which is one track to cause major disruption”.

“The British Retail Consortium estimates that 75% of retailers are unaware that this is coming into effect in September and the same is the case with the consumers,” he said.

“The implementation of this is forecast to lead to the failure of nearly a third of e-commerce transactions. So can I ask the minister whether she will ensure that no enforcement action will be taken for at least 18 months to give our retail sector breathing space to adapt to these new rules?”.

In support of the measure, Kelly Tolhurst, Conservative MP for Rochester and Strood and parliamentary under-secretary of state for small business, said it would offer both consumers and online vendors better protection.

“In 2016 there was £309 million in fraud in EU commerce vs £13.6 million in 1998. The European Banking Authority published an opinion on readiness and implementation. The FCA published a statement in June,” she said.

“They are working with regards to mitigation past the September implementation. They are working with industry. They are working with providers to make sure the essence of the changes prevails and that is making it safer for merchants and consumers.”

Due to concerns raised by industry the FCA has said it will give “some firms extra time to implement SCA”.

“The FCA recognises the challenges in meeting this deadline and has been working with the industry to develop a plan to migrate the industry to implement SCA for card payments in e-commerce as soon as possible after this,” it said on its website.

“We will not take enforcement action against firms if they do not meet the relevant requirements for SCA from 14 September 2019 in areas covered by the agreed migration plan, where there is evidence that they have taken the necessary steps to comply with the plan”.