3D-Secure 2.0
What is 3D-Secure and how it protects us from the threat of payment fraud.
What is 3D-secure (3DS)?
3D secure is an additional layer of security for online credit card transactions.
In Singapore, the Money Authority of Singapore (MAS) mandated that all card-issuing banks must provide cardholders with a One-Time Password (OTP). It is an authentication step to ensure that the customer making the online purchase is the rightful owner of the credit card in use.
3DS was first developed by VISA and offered to customers as ‘Verified by VISA’ service. It has then been adopted by MasterCard, under the name of ‘MasterCard SecureCode’.
Why should merchants use it?
3DS protects both cardholders and merchants from the threat of payment fraud. More importantly, 3DS offers a liability shift from online merchants to the issuing bank. Card issuers offer a payment guarantee for 3DS-authenticated online transactions. It protects merchants from chargebacks in the event of a fraudulent transaction.
Despite the advantages, 3DS is also associated with higher cart abandonment rates. Since there is an additional authentication step for customers, 3DS hurts both conversion rates and the overall payment experience.
Introducing 3D-Secure 2.0
To address these issues, EMVCo took it upon themselves to develop and introduce 3D-Secure 2.0 to the world of online payments.
3DS 2.0 offers a better user experience by doing away with the need for passwords, and introducing new authentication technologies, such as biometrics (eg. fingerprint/ face recognition).
Cardholders are only required to pass an authentication challenge if their transaction is deemed as high risk. If the transaction is determined to be of low risk, no further action is required by the cardholder.
“3DS 2.0 analyses 10x more data to support enhanced risk-based decision-making for card issuers.”
3DS 2.0 also brings in a wider range of contextual data (over 100+ data points) to the issuing bank to facilitate verification and assessment of the risk of the transaction.
Overall, 3DS 2.0 is the solution to streamline the online payment experience while improving security for both merchants and the card issuers.