{"id":10040,"date":"2022-11-24T14:25:12","date_gmt":"2022-11-24T08:55:12","guid":{"rendered":"https:\/\/razorpay.com\/blog\/?p=10040"},"modified":"2025-11-28T23:32:51","modified_gmt":"2025-11-28T18:02:51","slug":"3ds-2-0-and-what-it-means-for-indian-exporters","status":"publish","type":"post","link":"https:\/\/razorpay.com\/blog\/3ds-2-0-and-what-it-means-for-indian-exporters\/","title":{"rendered":"3DS 2.0 and what it means for Indian Exporters"},"content":{"rendered":"

Boost Success Rates, Enhance User Experience, and minimize fraud & chargeback Risks with 3DS 2.0\u00a0<\/i><\/b><\/p>\n

Fraud Management is one of the biggest challenges that Global businesses face today. Nearly $130 Billion is lost in fraud every year and 82% of global businesses are affected by it. Businesses thus spend significant resources to minimize their exposure to fraud. According to studies, global businesses spend 10% of their total Revenue to mitigate fraud.\u00a0<\/span><\/p>\n

The payments ecosystem including networks, banks, and regulatory bodies is constantly on the lookout to enhance security in online payments.\u00a0 This is done by means of processes, tools, and frameworks that improve security and build trust. One such framework is the 3D Secure<\/a> framework.<\/span>
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What is 3D Secure?<\/b><\/h2>\n

3D Secure or 3DS-enabled card transactions add an additional authentication<\/a> step that needs to be completed by the cardholder. This additional factor of authentication (AFA) could either be a One Time Password (OTP), a Personal Identification Number (PIN), or a biometric signature (face scan, fingertip scan, etc.). Successful completion of this step is mandatory in the 3DS framework for the transaction to go through. This significantly reduces the occurrence of fraud.<\/span><\/p>\n

3DS or 3DS 1.0 as a framework was established in 2003 by all major networks: Visa, Mastercard, American Express, and Diners to better safeguard businesses against fraud. In most cases, if a business enables 3DS on transactions, the chargeback<\/a>\/ fraud liability shifts from the business to the issuer bank. This ensures reduced revenue leakage and thus better profitability for businesses.<\/span><\/p>\n

Owing to these benefits, many regulatory bodies across the globe have mandated the use of 3DS transactions to safeguard businesses and customers from fraud and chargeback risks:<\/span><\/p>\n

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  1. India introduced a mandatory 2-factor authentication for cards in 2014<\/span><\/li>\n
  2. In 2019, as a part of PSDS 2, Europe enforced a strong customer authentication (SCA) framework<\/span><\/li>\n
  3. In 2020, Australia enforced authentication requirements similar to SCA in Europe<\/span><\/li>\n
  4. Brazil, Mexico, and Singapore have also introduced strict regulations recently<\/span><\/li>\n<\/ol>\n
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    Regions that mandate the use of the 3DS framework<\/figcaption><\/figure>\n

    Limitations with 3DS 1.0<\/b><\/h2>\n

    Despite its salient features with respect to fraud mitigation, 3DS 1.0 has had a few limitations that have led to limited adoption:<\/span><\/p>\n

      \n
    1. Friction in User Experience<\/b>: With a mandatory additional authentication step, there is a breakage in the payments experience which results in the abandonment of purchases. This is a major shift from the seamless non-3DS experience. Many businesses worldwide still disable 3DS on their transactions due to this.<\/span><\/li>\n
    2. Success\/Approval Rates:<\/b> An outcome of the added friction is that the transaction success rates take a hit with 3DS 1.0. With this, a majority of banks have also not actively promoted 3DS transactions despite its benefits against fraud.<\/span><\/li>\n
    3. Customer Password management<\/b>: Most Global banks still ask their customers to create a static password that is required in 3DS transactions. These are easy to forget and result in basket abandonment.<\/span><\/li>\n
    4. Compatibility with Mobile\/ Web Browsers: <\/b>Multiple studies and reports have highlighted concerns about the AFA screens not appearing on Mobile devices which causes transactions to fail. The Browsers used for transactions also may have an impact on the success of the transaction with 3DS 1.0.<\/span><\/li>\n<\/ol>\n

      3DS Secure 2: Smart Authentication\u00a0<\/b><\/h2>\n

      3D Secure 2.0 or 3DS2 is an upgraded version of the 3DS framework that provides an opportunity to skip the Additional Factor of Authentication (AFA) by completing an intelligent Risk-based Authentication.\u00a0<\/span><\/p>\n

      With Risk-based authentication, the issuer bank (cardholder\u2019s bank) decides whether second-factor authentication is required or whether it can be bypassed for each card transaction. This decision to skip AFA is based on the 50+ additional data points that are collected by card networks<\/a> (Visa, Mastercard, etc.) from Razorpay. These data points include:\u00a0\u00a0<\/span><\/p>\n