3D Secure 2.0: Key Considerations for US Retailers
You may have heard of 3D Secure (3DS) when it comes to digital payments. 3DS is an additional layer of card holder security and authentication for online card transactions. To validate cardholder identification and lessen fraud, 3DS links the three parties engaged in a transaction (the card issuer, the acquirer, and the payment system). For example, if a shopper is making a payment online via credit card and the bank determines that the transaction might be suspicious, the card issuer redirects them to a 3DS page for further verification.
The updated version of 3DS, 3DS 2.0 (3DS2), provides more “frictionless authentication.” With it, issuers can approve a transaction without requiring additional shopper input (e.g., the need to enter a password), streamlining the process and making it more user friendly. Retailers can also integrate 3DS2 into their mobile apps, empowering the same smooth checkout experience via that channel.
What Are Additional Benefits of 3DS2?
According to a Visa case study, using 3DS2 for payments results in a significant 70 percent decrease in cart abandonment rates. Furthermore, shoppers that used 3DS2 were able to reduce their checkout time by 85 percent, driving a simpler and more satisfying customer experience. Visa also claims that it gives retailers 10 times more data to help them boost security and authentication rates — likely the most compelling reason for adopting 3DS2. It not only expedites processing for legitimate customers but also more accurately flags fraudulent charges, providing more peace of mind to consumers that their credit cards aren’t being misused online.
Finally, the preferred standard for U.S. businesses subject to PSD2 regulations from the EU is 3DS2. A retailer conducting business in the EU will likely require 3DS2.
These are all strong reasons for adopting 3DS2 for online card transactions. However, while all banks and credit card processing networks in the U.S. require 3DS, 3DS2 isn't currently required domestically. But, as of Oct. 15, 2022, Visa is no longer supporting 3DS version 1.0.2. So where do retailers go from here?
To drive the adoption of 3DS2 in the U.S., it may take pressure on the card issuers and payment service providers from retailers and consumers to make this happen.
There are good reasons for the issuers to adopt 3DS2, including receiving a more comprehensive data set regarding the cardholder and transaction, which empowers them to make stronger risk decisions than previously possible. Given this, they're less likely to receive chargeback cases from cardholders as a result — reducing the time and costs involved with needing to resolve these.
From a payment service provider's perspective, those that work with retailers in Europe are already well familiar with 3DS2 and how to effectively incorporate it into their payments processes.
For the benefit of all involved with digital transactions, it’s the card issuers that need to take the plunge and make 3DS2 part of their offering for online card payments.
Jed Danbury is vice president at Computop, a global payment service provider. He has been working in the banking and merchant processing industry for more than 15 years.