# Is compliance to PSD2’s SCA a bridge too far for B2B merchants?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-01-20
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Navigating B2B Payments under PSD2: Challenges and Solutions
Meta Description: Discover the complexities facing B2B merchants with PSD2's Secure Customer Authentication and how they are coping amidst the deadlines and exemptions.
URL: https://financedigest.com/is-compliance-to-psd2s-sca-a-bridge-too-far-for-b2b-merchantshtml

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_By **Pat Bermingham,** CEO,_ [_Adflex_](https://www.adflex.co.uk/)

According to the European Central Bank, 79% of all card fraud in 2018 occurred online from Card Not Present (CNP) transactions. In cash terms, this equates to €1.43bn in fraud losses and represents a whopping 17% increase on the previous year.\[1\]

Against this backdrop you’d be forgiven for thinking that, for merchants, PSD2’s Secure Customer Authentication (SCA) couldn’t come soon enough. In reality, however, the [European Economic](https://www.financedigest.com/european-bourses-steady-as-focus-remains-on-key-economic-data.html "European bourses steady as focus remains on key economic data") Area’s 30th December deadline has had Europe’s suppliers in a tailspin, and many remain so even though the cut-off has passed. In the UK, the extended deadline of 31st September 2021 still feels ambitious, particularly now, as merchant productivity is strained under the pressure of lockdown and [remote working](https://www.financedigest.com/helping-employees-recover-from-remote-workings-mental-health-implications.html "Helping employees recover from remote working’s mental health implications").

**SCA for B2B payments**

None are feeling the pinch more than [B2B merchants](https://www.financedigest.com/embedded-payments-for-b2b-merchants-and-marketplaces-4-considerations.html "Embedded payments for B2B merchants and marketplaces: 4 considerations"). Unlike B2C e-commerce firms, those in the [supply chain](https://www.financedigest.com/how-to-create-a-sustainable-supply-chain.html "How to create a sustainable supply chain") routinely support multiple legacy transaction systems (POs and invoice systems, 30 day payment terms, BACS transfers, postal cheques) as well as card payments, making SCA just one of a whole host of payment-related challenges to contend with throughout the Covid-19 storm.

The complexity of B2B [payments throws more fuel](https://www.financedigest.com/the-role-of-invisible-real-time-payments-in-fueling-the-future-of-cx-in-business.html "The role of invisible, real-time payments in fueling the future of CX in business") on the fire. Supplier and buyer contracts commonly specify nuanced and flexible payment programmes linked to stock availability, throughput and [forecasted demand](https://www.financedigest.com/cable-cars-and-ropeways-market-report-size-growth-demand-scope-opportunities-and-forecast-2016-2026-fmi.html "Cable Cars and Ropeways Market Report | Size, Growth, Demand, Scope, Opportunities and Forecast 2016-2026: FMI") for goods. How should these order and payment models, many of which are settled with corporate purchasing cards, be catered for under SCA? Manufacturers, for example, can take [card payment](https://www.financedigest.com/why-latin-america-chose-biometric-authentication-for-payment-cards.html "Why Latin America Chose Biometric Authentication for Payment Cards") details from a buyer at the point they place an order, so they can secure – but not yet take – their payment. But when that order takes weeks to fulfil, when should the SCA procedures take place? At the start? Or when the order is shipped? What about when a buyer’s corporate card details that are taken over the phone, via post or email, and then entered by the supplier into their own web-hosted [payment system](https://www.financedigest.com/covid-19-putting-a-spotlight-on-mea-payment-systems.html "COVID-19: Putting a spotlight on MEA payment systems")?

![Pat Bermingham](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/image003-1736838630131-compressed.jpg)

Pat Bermingham

**SCA: B2B exemptions and exceptions**

The PSD2 Regulatory Technical Standards (RTS) does specify SCA ‘exemptions’. One example is when a supplier accepts a [corporate card payment](https://www.financedigest.com/what-does-the-future-hold-for-corporate-payments.html "What Does the Future Hold for Corporate Payments?") via a ‘secure environment’, such as when the buyer logs in to a merchant’s trade portal. Problems arise here, however, since the RTS puts the onus on the issuer to specify what constitutes ‘secure’. And since merchants are routinely forced by [customers to accept payments](https://www.financedigest.com/can-banks-acquire-customers-with-biometric-payment-cards.html "Can banks acquire customers with biometric payment cards?") from a variety of issuers and networks, they then need to navigate through all the nuances that occur between these issuers before they can call themselves compliant.

Then there are ‘exceptions’. Here, merchants can evidence to their acquiring bank (which is overseen by the local Competent Authority) that they are performing Merchant Initiated Transactions (MIT) and/or adequate Transaction Risk Analysis (TRA). Satisfy these requirements and the merchant can be granted an exception. Again, however, these processes are hamstrung by complexity. An MIT [payment can only be made if it is based on a prior agreement with a customer](https://www.financedigest.com/improving-customer-experience-and-profits-with-embedded-payments.html "Improving customer experience and profits with embedded payments") before it is initiated. Can that be a verbal agreement given over the phone? Does it need to be in writing? In a contract, even? How many local builder’s merchants, for example, liaise with their trade customers in writing, let alone hold contracts?

**Getting clarity on B2B SCA changes**

For many B2B firms, this is the root of the problem: clearly understanding what [changes need](https://www.financedigest.com/change-is-inevitable-how-banks-need-to-adapt-to-customers-new-banking-habits.html "Change is inevitable – how banks need to adapt to customers’ new banking habits") to be made to their payments acceptance process and in what circumstances they should be applied. Then comes the job of upgrading their systems. Corporate card programmes from different schemes and issuers have varying parameters for implementation, making an across-the-board [change in response to regulation](https://www.financedigest.com/german-regulator-stays-vigilant-as-meta-changes-vr-headset-rules.html "German regulator stays vigilant as Meta changes VR headset rules") impossible. Instead, it spirals into complexity and becomes a costly drain on resources. Increasingly, these upgrades need specialist experience which, frankly, no modestly resourced [supply chain business should reasonably expect](https://www.financedigest.com/german-engineering-firms-expect-hit-from-supply-chain-bottlenecks-next-year.html "German engineering firms expect hit from supply chain bottlenecks next year") to develop inhouse, let alone in the middle of what must be one of the worst-hit trading years on record.

B2B merchants [urgently need](https://www.financedigest.com/why-the-us-urgently-needs-media-compliance-auditing.html "Why the US urgently needs media compliance auditing") to think differently about how they manage their payments. The current furore is actually a [big opportunity](https://www.financedigest.com/bae-systems-sees-big-opportunity-in-space-after-uk-satellite-bolt-on.html "BAE Systems sees big opportunity in space after UK satellite bolt-on"). If merchants can nail SCA now and start utilising the new generation of compliant card payment facilities like 3D-Secure, tokenized Card on File or even EMV® Secure Remote Commerce / Click-to-Pay, all of which enhance both security and buyer confidence, they can use this storm to position favourably to the [market and increase business](https://www.financedigest.com/how-to-create-a-pr-plan-and-link-it-to-your-business-marketing-strategy.html "How to create a PR plan and link it to your business marketing strategy").

The case for offloading these challenges to a specialist B2B payments [platform provider](https://www.financedigest.com/impact-com-acquires-pressboard-providing-publishers-with-a-best-in-class-platform-for-branded-content-as-digital-advertising-is-deprioritised.html "impact.com acquires Pressboard, providing publishers with a best-in-class platform for branded content as digital advertising is deprioritised") has never been stronger. Not only will such a partner take the SCA compliance pressure off now, it will continue to do so for every future regulatory or [systems upgrade](https://www.financedigest.com/sweden-to-upgrade-berzelius-supercomputer-with-nvidia-ai-systems.html "Sweden to upgrade Berzelius supercomputer with Nvidia AI systems") required in the future, whether that’s coming from a card scheme, a regulator or, indeed, a new a customer.


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