New Stripe Tool Aims to Improve EU Payment Authentications

Financial infrastructure platform Stripe has unveiled a delegated authentication feature that the company said is designed to improve payment conversion rates in Europe.

As the Dublin-based company said in a news release Monday (June 6), businesses that use Stripe can now allow their customers to authenticate purchases inside a checkout flow. Stripe said the U.K. FinTech Wise is the first card issuer to use the feature.

Stripe noted that the launch is happening against the backdrop of the EU’s recent rollout of its Strong Customer Authentication (SCA) regulation, designed to curb payment fraud. The rule says issuers must use two-factor authentication to verify customer info. If fraud occurs, the issuing bank is liable and the business is not exposed.

Read more: Merchants Risk Losing Customers as New UK SCA Rules Kick Off

“SCA has cut fraud, but has also reduced legitimate economic activity,” Stripe said. “Visa estimates that SCA-compliant transactions have suffered an 11% drop in conversion rates due to purchasers needing to shuffle between different apps at checkout.”

The company said its delegated authentication feature embeds biometric authentication into the merchant’s checkout, moving responsibility for authenticating transactions from card issuers to Stripe. Meanwhile, Stripe “dynamically adapts two-factor authentication methods to suit a purchaser’s preferences and device capabilities.”

That means customers aren’t directed from the checkout page mid-purchase, while merchants are still protected against payment fraud.

“Across all SCA-covered transactions, this could save billions for businesses every year,” said Matt Henderson, EMEA business lead at Stripe.

Stripe said that with this service, SCA-relevant payments will see a 7% increase in payment conversion, while the authentication process is four-times faster than if buyers were rerouted to their banking app or sent a one-time passcode.

Learn more: Stripe Helps German Digital Bank N26 Streamline Accountholder Deposits

The launch comes a few days after Stripe announced it was working with N26 to help the German neobank simplify its account top-up process.

With Stripe’s input, N26 can offer customers multiple ways to make payments, including credit cards, debit cards and digital wallet top-ups from its app.