3D Secure: All You Need to Know

According to the E-commerce Attack Rates report by Experian Information Solutions, nearly 6.64 % of the U.S. became victims of online identity fraud. E-commerce fraud attacks also increased by almost 30% in 2018 compared to previous years.

Thankfully, there are preventive measures that can be taken to protect your e-commerce business and your customers from payment fraud if you are looking for ways to reduce the risk of unauthorized charges in your online business, keep 3D Secure on your radar.

Created by Visa and MasterCard, 3D Secure, also called 3DS, is a technical standard that adds a layer of security to online credit and debit card transactions. 

Different card networks developed their own 3D Secure transaction products:

The term 3DS stands for 3 Domain Server. The technology is named this because every 3D Secure transaction involves three parties:

3D security protocol adds an additional level of payment protection to an online transaction. In order to complete an online purchase, the cardholder is asked to provide proof of identity by entering a unique password, an SMS code or a temporary PIN.

Here are the initial steps involved in the 3D Secure process:

A significant benefit of 3D Secure is that it protects users and merchants from the threat of payment fraud.

The payment liability shift is another perk of 3D Secure for online merchants. By completing an additional authentication step through 3D Secure, an issuing bank becomes liable for fraudulent chargebacks. Even if the customer claims they have an unauthorized payment from you on their card, the card provider will usually be accountable for managing the refunds.

Fewer chargebacks also mean more money in your pocket. 3D Secure helps mitigate the resources associated with dispute management, chargeback penalties, and fees.

The liability shift, however, sometimes comes at the cost of conversion rates. 

While the 3D Secure protocol is one of the most effective payment fraud prevention methods, it is often associated with higher cart abandonment rates.

As a general rule of thumb, the longer the checkout process is, the more likely the customer is to abandon their carts altogether. Adding another authentication step for them to complete often hurts conversion rates and the overall shopping experience.

Deciding between higher conversions and lower fraud risk is a tough choice.

The good news is that with improved 3D Secure 2.0 protocol, the merchants can better prevent fraud and deliver enhanced customer experience.

The primary purpose of the new 3D Secure 2.0 protocol is to facilitate better information exchange between the three parties of the transaction.

3DS 2.0 simplifies the payment process. Instead of the static password that must be remembered in version 1.0, the 3DS 2.0  protocol uses a token-based and biometric authentication like face or voice recognition.

Overall, the new 3D Secure 2.0 technology means less checkout hassle for customers: shorter waiting time, fewer passwords to remember, and most importantly, fewer steps when completing the purchase.

Unlike the previous version of 3D Secure, the 2.0 protocol supports non-browser-based payment methods, including wearables, in-app purchases, mobile payments, and digital wallets.

3DS 2.0 also promises improved risk assessment. When approving or declining a 3DS 2.0 transaction, over 100 data points are transferred to issuing banks. That’s almost ten times more data points than the previous protocol used. The more information the system analyzes when doing authentication, the better the chances of fraud prevention.

As a result of these changes, merchants will see fewer cart abandonment and higher conversion rates. Experts say that by using 3DS 2.0, the checkout time can be reduced by 85%, and cart abandonment rates can be lowered by 70%.

As e-commerce continues to evolve, so does 3D Secure technology.

The recently introduced 3D Secure 2.0 protocol is a giant leap forward in online payments. Not only does the technology offer smoother shopping experiences, but it also takes online payment security to a whole different level.

If you are still on the fence about the protocol, now is an excellent time to jump on the bandwagon of 3D Secure technology.