3D Secure Explained: Benefits for Businesses and Consumers

What Is 3D Secure (3DS)?

3D Secure (3DS) is an authentication protocol designed to enhance the security of online card transactions. It ensures that only the authorised cardholder can complete the transaction, protecting both you and your customers from fraud.

The term “3D” refers to the three domains involved in the process:

1. Issuer Domain:

The bank that issued the card to the customer.

2. Acquirer Domain:

The merchant’s bank, which processes the payment.

3. Interoperability Domain:

The infrastructure provided by card networks like Visa and Mastercard enables secure communication.

3D Secure has evolved over time and is available in two versions: 3DS 1.0 and the more advanced 3DS 2.0.

Example of 3D Secure in Action

Imagine a customer making an online purchase on your e-commerce website. After selecting their items, they proceed to the checkout page and enter their card details to complete the payment.

Once the payment details are submitted, the 3D Secure authentication is triggered. The customer receives a prompt for additional verification, such as entering a one-time password (OTP) sent to their registered mobile number or using biometric authentication like a fingerprint scan.

Here’s how the process unfolds:

1. The customer enters the OTP or completes biometric verification.

2. The authentication system confirms their identity.

3. The transaction is approved upon successful verification, and the payment is processed securely.

This additional layer of security ensures that only the authorised cardholder can complete the purchase, preventing unauthorised transactions. For you as a merchant, this reduces the risk of fraud while giving your customers peace of mind during their 3D Secure payment experience.

How Does 3D Secure Work?

1. Payment Initiation:

You begin the payment process by selecting your items and proceeding to checkout.

2. Card Details Entry:

You enter your card information, such as the card number, expiry date, and CVV. At this point, the 3D Secure protocol is triggered.

3. Authentication Prompt:

Your bank sends a one-time password (OTP) to your registered mobile number or prompts you for biometric verification.

4. Verification:

You enter the OTP or complete the biometric check to confirm your identity.

5. Transaction Approval:

If the authentication is successful, the transaction is approved, and payment is completed. If not, it is declined to ensure security.

Use Cases of 3D Secure for Businesses and Consumers

1. E-Commerce Platforms:

For online retailers, 3D Secure authentication significantly reduces the risk of fraud-related chargebacks by ensuring that only the authorised cardholder can make a purchase. It fosters trust and boosts customer confidence during online transactions.

2. Subscription-Based Services:

Businesses offering recurring billing services, such as OTT platforms or fitness apps, can use 3D Secure to authenticate customers during the initial payment setup. This ensures safe recurring payments while safeguarding sensitive card information.

3. Travel and Hospitality:

High-value transactions, like booking flights or hotel reservations, require an added layer of security. 3D Secure payments protect both consumers and merchants by verifying the legitimacy of these transactions, reducing the risk of fraud.

4. Digital Wallets and Apps:

For in-app payments made through digital wallets or mobile apps, 3D Secure adds an extra layer of safety. This feature ensures the payment process is both seamless and secure, giving users peace of mind.

5. Cross-Border Transactions:

In international e-commerce, 3D Secure minimises the risks associated with cross-border payments by verifying cardholder identity. This reduces fraudulent activities and provides businesses with a reliable payment process for global transactions.

Benefits of 3D Secure for Businesses

1. Reduced Fraud:

3D Secure reduces unauthorised transactions by adding an additional authentication layer. It safeguards your business against fraudulent activities and protects revenue by minimising losses due to fraud-related chargebacks, ensuring a safer payment environment.

2. Increased Customer Trust:

Customers feel secure knowing their online transactions are protected with 3D Secure. This enhanced sense of security builds trust, encouraging repeat purchases and fostering loyalty, which is vital for your business’s growth and reputation in the competitive e-commerce landscape.

3. Regulatory Compliance:

Implementing 3D Secure helps your business meet global payment regulations, such as PSD2. This ensures you operate within legal frameworks while offering secure payment options to customers, demonstrating your commitment to safety and compliance.

4. Lower Chargeback Risk:

With 3D Secure, liability for chargebacks shifts to the card-issuing bank after successful authentication. This reduces financial risks for your business, offering greater protection against revenue loss and improving operational efficiency.

Benefits of 3D Secure for Consumers

1. Enhanced Security:

3D Secure protects your sensitive personal and financial data by adding an extra layer of verification. It ensures safer online payments, giving you peace of mind when shopping or making digital transactions.

2. Reduced Fraudulent Transactions:

By verifying your identity before a payment is approved, 3D Secure prevents unauthorised transactions. This ensures that only you, the rightful cardholder, can complete purchases, safeguarding your finances.

3. Convenience with 3DS 2.0:

3DS 2.0 enhances the payment experience with faster, seamless authentication methods like biometric verification or OTPs. It ensures security while maintaining convenience, allowing you to complete transactions effortlessly.

Challenges of 3D Secure

1. Transaction Drop-offs:

The additional authentication step in 3D Secure can sometimes lead to transaction drop-offs. Customers may abandon their carts if the extra steps are inconvenient or time-consuming, negatively impacting conversion rates. Ensuring a smooth, quick authentication process can help minimise this issue.

2. Compatibility Issues:

Older websites may not support 3D Secure 2.0, which could lead to compatibility issues and prevent seamless transactions. Merchants may need to update their payment gateways and websites to ensure full support for the latest authentication protocols and maintain a secure payment environment.

3. User Frustration:

If verification methods like OTPs fail or are delayed, customers may become frustrated and abandon the transaction. These technical glitches can hinder the payment process and affect the user experience. Optimising the authentication flow reduces these frustrations and maintains customer satisfaction.

3D Secure 1.0 vs. 3D Secure 2.0

Frequently Asked Questions (FAQs):

1. How do I enable 3D Secure?

To enable 3D Secure, contact your card-issuing bank or log in to their online banking portal. Many banks automatically enrol customers, but you may need to activate it manually for some cards. The process typically involves setting up an OTP or a secure PIN.

2. Which credit cards support 3D Secure?

Most major credit cards, including Visa, Mastercard, and American Express, support 3D Secure. The feature depends on whether your bank offers 3D Secure authentication for its cards. Check with your bank to confirm compatibility.

3. How do I know if my card has 3D Secure authentication?

You can verify if your card supports 3D Secure by contacting your bank or attempting an online transaction on a merchant site that uses 3D Secure. If supported, you will be prompted to complete an additional authentication step like OTP or biometric verification.

4. What are examples of 3D Secure?

Examples of 3D Secure include Verified by Visa, Mastercard Identity Check, and American Express SafeKey. These are branded implementations of 3D Secure used during online transactions to verify the cardholder’s identity.

5. Is 3D Secure mandatory for all online transactions?

3D Secure is commonly used for online transactions in India to enhance payment security, but it is not mandatory. Merchants and banks often implement it for high-value transactions or where additional authentication is required.