Colin Abrey VP, Sales UK&I Channel and MEA of Nextivity explains why Wi-Fi only networks do not provide all the connectivity options needed to be compliant with the latest PSD2 regulations
The UK’s e-commerce market, already the world’s third largest, is predicted to grow by nearly 26% by 2025 to reach over £260 billion in transaction value, according to a recent study carried out by Finextra, with internet retail accounting for a third of this. In 2020, internet retail sales grew by a staggering 47% – driven primarily by the pandemic – and in 2021 online sales constituted nearly 30 percent of overall UK retail sales. Whilst this booming industry is great news for the country’s economy, the growth of new ecommerce customers has also led to a corresponding rise in payments fraud. To give some perspective to the seriousness of the situation more than £16m lost to online shopping fraud during lockdown alone.
Online theft has resulted in FCA tightening the ecommerce payment regulations (PSD2) with the introduction of SCA (strong customer authentication) for certain ecommerce transactions, a process designed to add an extra layer of fraud protection when cardholders make a payment by means of a one-time pass code or in App verification before an online transaction can be completed.
SCA is only starting to take effect due to technology shortfalls
Although these tighter controls officially became law in the EEA and UK in 2019, many national regulators did not start actively enforcing them until this year due to the sheer magnitude of technology overhauls needed for compliance to be practically achievable. However, apart from impacting card not present transactions (CNP), SCA also applies to retailers offering financial lending or interest free credit for the sale of high value ticket items such as furniture, cars, electronics etc. In bygone days applications could be made manually or at the discretion of the retailer. But under the new regulations, all financial agreements and assessments must be undertaken online, and an authentication code must be subsequently generated before applications can be processed further for authentication purposes to offer fairness and transparency to consumers.
One time pass codes are delivered via SMS or MMS
Unfortunately applying for interest credit is not always a seamless process in large retail stores because of a mobile connectivity short fall as the required pass codes are delivered via txt message, for proof of possession reasons. To take applications to the next level retailers are increasingly obliged to ask their customers to move around the store, or even go outside in search of a mobile signal. Not only does this make for a poor purchasing experience, once your customer has left the store there is no guarantee they will return which ultimately leads to a loss of revenue thus impacting the bottom line.
Although some retailers have invested in sophisticated Wi-Fi systems to ensure high speed data services and to enable smart building applications such as access control, lighting and CCTV, Wi-Fi is data driven and does not support texting. SMS messages are transmitted via cellular services and therefore require connectivity to a mobile network
Modern shoppers are mobile first
Poor instore mobile connectivity doesn’t just impact lending agreements either. Contactless payment systems often require cellular coverage. Additionally, modern shoppers have low attention spans, shop mobile first, follow peer recommendations more often than not, and research the best deals online before making a final purchase. If your customers have to go outside to make a price comparison because your instore mobile signal is poor to non-existent, chances are those customers will not re-enter. More than two thirds of purchases are made at the point of decision, so not only have you lost the opportunity to make a sale on a specific item, you’ve also lost other spontaneous spending opportunities.
Ensuring reliable mobile coverage is no longer an arduous task
Providing seamless mobile coverage in retail environments has historically been challenging due to shop fitouts, basement locations and the materials used, with glass and metal being the ultimate mobile signal blockers. The only way around the problem is to take the outdoor signal indoors via third party equipment such as mobile signal boosters, but this has historically been expensive to deploy and shrouded in strict licensing regulation.
Fortunately, now that Ofcom has relaxed the rules pertaining to said repeater, retailers can for a modest investment improve shopping experiences whilst providing adequate coverage needed to be compliant with SCA regulation. Seamless instore connectivity allows them to enhance the customer purchasing journey enabling smartphone interaction with other instore technologies.
Connective enhancements not only help brands strengthen their online presence; it also allows them to maintain a physical presence fit for purpose for tech savvy shoppers. With inflation levels at their highest in 40 years the retail industry continues to grapple with uncertainty and every single purchase counts.
By providing customers with reliable instore mobile coverage, retailers can capitalise on changing shopping trends by delivering the ultimate shopping experience through interaction with other instore technologies. Wi-Fi networks alone do not deliver wow factor shopping experiences and retailers failing to realise this could see turnover eroded further as customers go elsewhere.