Monzo to use app notifications to address Strong Customer Authentication communications issues

Smartphone with Monzo chip&PIN notification
NOTIFIED: Monzo customers will get a message telling them why their contactless payment has been declined

UK-based neobank Monzo is to use app notifications to provide customers who have a contactless card transaction declined due to new Strong Customer Authentication (SCA) requirements with the information needed for them to successfully complete their transaction.

SCA forms part of the EU’s revised Payment Services Directive II (PSD2). It officially came into force across Europe on 14 September 2019 but the European Banking Authority (EBA) gave permission in June 2019 for individual countries to provide those affected with additional time to comply.

For contactless card transactions in retail stores, the regulation requires consumers to authenticate themselves in an SCA-compliant manner — typically by making a chip and PIN transaction — either with every fifth transaction or every time the total cumulative value of the transactions they have made since their last authentication reaches €150 — whichever comes sooner.

The issue Monzo is seeking to address with the app notifications is that consumers who are in this situation will typically receive just a simple ‘transaction declined’ notice at the point of sale, with no indication of why the problem has occurred or what they can do to resolve it.

Mobile contactless payments are not affected, as customers typically use a biometric to authenticate themselves every time they make a transaction.

Monzo’s system is designed to address potential customer confusion by providing additional information on why the transaction has been declined and what they should do to successfully complete their purchase with their Monzo card — while they are still at the checkout.

These app notifications will take the format of, for example: ‘£6.10 declined at Boots because you haven’t used your PIN in a while. Please use chip and PIN’.

“When you spend around £100 in shops (across multiple payments, not just in one go) without having used chip and PIN, we’ll do an extra security check by declining the next contactless payment and asking you to use chip and PIN instead,” Monzo has explained to customers.

“This is a big change for retailers, so the shop won’t necessarily know why your card is being declined. But when the reason is an SCA security check, we’ll always send you a notification from Monzo asking you to retry the payment with chip and PIN.”

“Some contactless payments won’t ever decline,” Monzo adds. “You can keep paying for things normally using Apple Pay on an iPhone and Google Pay on an Android device without these extra checks.

“Similarly, payments won’t decline for most transport systems (like TfL) where the machine you use is unattended.”

“Monzo have a £100 limit because our cards also support a small amount of offline usage, and this is to prevent you from going over the limit while offline (which we would be unable to see until the next day),” the bank also explains.

“We felt it was a much better trade-off to continue to support this case, and make sure you can’t exceed your contactless limit at the same time.”