How Can 3DS Authentication Enhance My Payments Flow?

Originally published by TokenEx.

As the rapid growth of ecommerce platforms and digital payments continues, the amount of card-not-present (CNP) transactions has increased. While this can provide extra convenience for the cardholder, merchants must engage with digital channels to manage activity, increase sales, improve security, and lower threats while creating a quick and easy checkout process for their consumers. Due to the rise in popularity of customers shopping online, fraud is more common and even harder to control. For businesses to succeed online, they must mitigate these issues and help ensure the authenticity of card-not-present transactions through other authorization technologies that have been introduced and developed.

Strong customer authentication (SCA) was established by the EU Revised Directive on Payment Services (PSD2) in 2019 to help support the security of digital transactions and is a preferred method for ensuring the authenticity of CNP payments. This technology requires multi-factor authentication (MFA) form to be completed for CNP scenarios. This can be satisfied by 3-D Secure (3DS) technology and will provide enhanced security to support and protect the identity of the cardholder.

Quick Hits:

• Card-not-present transactions occur when neither the cardholder nor the credit or debit card is physically present to complete a purchase.
• CNP fraud makes up 73 percent of card fraud in 2023.
• With the rise of payment fraud, 3-D Secure 2.0 offers an additional security layer to confirm the legitimacy of a cardholder’s identity for CNP transactions.

Why is 3-D Secure Valuable?

Authenticating users when they make digital purchases will help reduce the risk of fraud, identity theft, and other associated concerns. 3DS is extremely important in the fast-growing ecommerce environment because it allows industries to continue investing in new protective technologies and consumers to continue purchasing online. This extra layer of security confirms the legitimacy of transactions and ensures the authenticity of cardholders. As a result, by making payments secure and protecting consumer data, 3DS is an effective and commonly used method for meeting the SCA requirements of PSD2.

3-D Secure 2

The newest version of this protocol, EMV 3DS (also known as 3DS2), was released by EMVCo and used a more advanced process when authenticating. During the first launch of 3DS, cart abandonment was a huge issue. Now with the latest version, users can authenticate themselves with their card issuer. The merchant involved must use EMV 3DS to authenticate and confirm that the consumer making the purchase is the actual cardholder. Then the transaction data and device information are sent to the issuer for review. They decide the authentication type and process the payment instantly. This process occurs invisibly to the user and authenticates the payment automatically with less friction. Any questions about the legitimacy or concerns about suspicious behavior will be flagged, and users can receive a message with a code to verify their identity. This process has been a less disruptive and more secure experience for consumers.

Fight Card Fraud

EMV 3DS is key for fighting and beating credit card fraud. This is valuable to consumers because they will have more confidence in purchases going through quickly and safely, and card issuers will have better fraud management and authentication methods. In contrast, merchants will have more security and fewer friction issues. Overall, each party involved will enjoy the benefits of additional profitability and less liability being created.