New anti-fraud rules came into force last month, and they could be good news for the UK high street.
Under the new rules, which went live on 14 March, online shoppers will need to be verified using Strong Customer Authentication (SCA) before payment can be made.
The Financial Conduct Authority (FCA) has put this process in place to target online fraud crimes. It will mean that shoppers purchasing more expensive items online (over £25) will have to enter a PIN, a password or passcode sent to them ─ or log into their own banking app to authorise the sale. Many smaller purchases in quick succession may also trigger the extra layer of checks.
Online retail is booming ─ Amazon reported a 200% rise in profits during Covid.1 E-commerce now accounts for more than one-quarter of all retail sales in the UK, and this number is expected to increase steadily. Experts predict it will reach nearly one-third of all retail sales by 2024. This has, however, led to a rise in cyber fraud, as online criminals have taken advantage of the change in customer habits ─ e-commerce crime leapt by 50% in 2020 as the global pandemic pushed people back into their homes and online shopping.2
So the new steps are a good thing – they may mean things take a little longer, but they are being put in place to weed out the criminals and prevent more cyber fraud.
There is a second knock-on positive result that could come from this introduction. For many people, entering additional details or downloading new apps is not a preferred route to shopping. Mastercard says it expects about 25% of online transactions to require some form of extra verification by the customer, who may not already bank online and be familiar with the procedures.3 The changes may actually send more people back to the high street ─ where footfall will certainly be welcomed.
Social distancing and lockdowns had an unprecedented impact on the UK high street. But the slowdown had already started before the Covid pandemic ─ since at least 2012, there has been a consistent increase in the number of store closures across Britain.4 Between 2010 and 2020, nearly 1,400 retailers entered administration.5
However, last month saw some positive news, as the FT revealed that high street sales are now higher than before the pandemic. A consumer shift towards local shopping has meant spending is up by more than 10% in some suburban areas and towns, which are not dependent on daily commuter traffic.6
Online shopping is, of course, expected to dominate in the future. It’s convenient, quick and often cheaper ─ and we live in a digital world. However, the high street is evolving to cope, and as consumers prioritise a more sustainable lifestyle, locally sourced products will continue to gain popularity. One-third of UK shoppers want to shop responsibly, according to research carried out by Empathy.co7 – and 66% of shoppers in the UK are now more likely to shop in their local community than they were a year ago, according to research by Mastercard.8
The new security measures may mean things take a little longer. But this is not a bad thing, as they offer multiple benefits. More privacy and safety in an increasingly online world, a reassurance that we are protected, and a small push back to the high street, where we can be more sustainable in our habits, support local businesses and enjoy bricks and mortar shopping once more.
Quotes from well-known and specialist insurers, including: