Designing payment flows for SCA

New regulation known as Strong Customer Authentication, or SCA, is changing online payments in Europe. See the impact it may have on your payment flows and learn how Stripe can help.


Last updated on September 14, 2019

Starting September 14, 2019 new payments regulation is being rolled out in Europe, which mandates Strong Customer Authentication (SCA) for many online payments in the European Economic Area (EEA). SCA is part of the second Payment Services Directive (PSD2).

To meet the new SCA requirements, a form of two-factor authentication is required for many online card payments in Europe. Without authentication, many payments may be declined by your customers’ banks. We designed new foundational payments APIs to help businesses handle this change and take full advantage of any SCA exemptions.

We recommend using this guide to understand how different types of payment flows have to change due to SCA, and to reference it as you redesign your payment flows.

How payments are changing

Traditional card payments usually involve two steps: authorization and capture. A payment is authorized when a customer’s bank or card issuer decides to approve a payment, and the payment is captured when the card is charged.

With SCA, there is an additional and mandatory step before authorization and capture: authentication. This step helps protect customers by preventing fraud. To authenticate a payment, a customer responds to a prompt from their bank and provides additional information. This may be something they know, like a password, something they use, like their phone, or something that’s part of who they are, like their fingerprint.

The most common way to authenticate a payment is a method called 3D Secure. You may recognize 3D Secure by its branded names, such as “Visa Secure” or “Mastercard Identity Check.” There’s a new version, called 3D Secure 2, that is expected to become the standard method to authenticate payments. You can learn about the differences between these methods in our 3D Secure 2 guide. Our new payments APIs, Stripe Billing, and the new version of Stripe Checkout, all support 3D Secure 2.

No matter what method you use, customers must be on-session to authenticate, which means they need to be using your website or app. Adding this step can be simpler for businesses that charge customers right away, and more complex for businesses that charge customers after they’ve left the checkout flow. (This is sometimes called off-session.)

The scenarios in this guide offer examples of how these three steps (authentication, authorization, and capture) can vary depending on how and when you charge your customers.

  1. Authenticate
    A customer authenticates an online payment.

    A customer responds to a 3D Secure prompt from their bank and provides additional information to authenticate the payment. See 3D Secure from the customer’s perspective.

    Authentication is required when a payment isn’t eligible for an exemption or when the customer’s bank denies an exemption request. Our new payments APIs automatically requests any eligible exemptions before adding the authentication step. This simplifies checkout flows and protects conversion rates.

    Did you know: Authentication has to happen while the customer is on-session, or using your website or app, so this step typically happens when the customer completes the checkout form.

  2. Authorize
    Your business asks the customer’s bank to approve the payment.

    The customer’s bank decides whether to approve or decline a payment. If approved, the funds are put on hold and guaranteed for seven days. If an authorization request is declined, your business needs a way to bring the customer back on-session to re-authenticate the payment and then attempt to authorize again.

    Did you know: An authorization request can still be declined by the customer’s bank after it’s been authenticated. This can happen if the customer doesn’t have enough funds or the card has expired.

  3. Up to 7 days

    The time period between authorization and capture can be up to seven days, but most businesses capture a payment immediately after authorization.

    Did you know: A customer’s bank may show that a payment is “pending” if it has been authorized but not captured.

  4. Capture
    The business charges the customer’s card, completing the payment.

Understanding exemptions

There are certain types of payments—such as low-risk transactions, fixed-amount subscriptions, phone sales, and merchant-initiated transactions—that may be exempt from SCA. Merchant-initiated transactions are payments made with a saved card when the customer is off-session. Common examples include a gym membership payment or utility bill. To qualify for this exemption, your business must have an agreement with your customer and have them authenticate their card when it’s being saved or authenticate the first payment. Our Strong Customer Authentication guide goes into greater detail about these exemptions and others.

Stripe’s SCA-ready payment APIs and products help businesses take full advantage of these opportunities by automatically requesting exemptions. When exemptions are accepted by your customers’ banks, your customers won’t have to authenticate, minimizing the impact on conversion.

However, businesses can’t rely on exemptions and must design their payment flows to authenticate customers when necessary. This is because the rules around exemptions depend on your customers’ banks. The banks evaluate each payment and decide whether an exemption applies—and individual banks will apply exemptions differently.

Business scenarios

To illustrate the impact and application of SCA, we’ve outlined how an authentication step can fit into payment flows for different business models.

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