Strong customer authentication rules to define and shape the future of fintech in Europe.
The Dublin company provides SCA (strong customer authentication) technology that is used on a daily basis by companies such as N26 and TransferWise to enable frictionless authentication on mobile and desktop.
‘Payments providers who can abstract away SCA complexity will have a significant advantage over their competitors’
– RON VAN WEZEL
SCA is a new EU regulation coming into effect on 14 September 2019 as part of PSD2, and it will radically change the way European customers buy online. As a result, the internet payment landscape is going to change a great deal, and both banks and businesses operating online are going to have to adapt.
We’re excited to welcome Touchtech to Stripe: https://t.co/yjcgkurhZp.
Touchtech builds software that helps banks enable frictionless and secure payment experiences. We’re looking forward to supporting their work to improve the online payments ecosystem.
— Patrick Collison (@patrickc) April 17, 2019
“On the modern internet, payments should be everything you’d expect: easy, secure and fully compliant with the latest regulations,” said Will Gaybrick, Stripe’s chief product officer.
“Unfortunately, these three attributes are often at odds with one another, making it nearly impossible for an individual business to keep pace with regulatory changes and build a great payments product experience for their customers. Touchtech adds yet another layer to the economic infrastructure Stripe is building for the internet, which is designed to help businesses comply not only with SCA but also with the entire next generation of regional payment regulations.”
As part of Stripe, Touchtech will continue to grow its products, working from Stripe’s Dublin engineering hub.
“Strong customer authentication, a new EU regulation coming into effect on 14 September 2019, will radically change the way European customers buy online,” Touchtech said in a blog post confirming its acquisition by Stripe. “As a result, the internet payment landscape is going to change a great deal, and both banks and businesses operating online are going to have to adapt.
“Touchtech’s focus is on making it straightforward for banks to provide the best authentication experience to their customers.”
The SCA ticking timebomb
More than 300m European consumers will need to confirm their identity for the majority of their online purchases using two of the following: something they know (a password), possess (a smartphone) or are (biometrics, such as their fingerprint).
According to Stripe, hundreds of thousands of European online merchants – from retailers to ridesharing companies to crowdfunding services – will have to upgrade their payments set-up to prepare for the upcoming regulation. If they don’t, their transactions will be declined outright.
“SCA is a ticking timebomb for the European payments industry,” said Ron van Wezel, senior analyst at Aite Group. “Merchants must deal with a complex set of changes to the payment flow that can have a disruptive impact on the customer experience. Yet, awareness among merchants is low.
“Payment service providers are at a turning point. SCA is simply too complex for any merchant to manage on its own, including for large online businesses. Payments providers who can abstract away SCA complexity will have a significant advantage over their competitors.”
The acquisition of Touchtech follows Stripe raising $100m in a funding round earlier this year that values it at more than $22bn. The recent investment came from Tiger Global, which previously led a $245m funding round in September 2018. As well as Tiger Global, investors in Stripe include big names such as Peter Thiel, Elon Musk, Sequoia Capital and Andreessen Horowitz.
In recent weeks Siliconrepublic.com reported that Stripe planned to grow its engineering team in Dublin 10-fold after it secured a crucial e-banking licence from Ireland’s Central Bank that will enable it to process pan-European payments following a hard or soft Brexit.