3D Secure payments: new trends on the horizon

3D Secure 1.0 brought additional security, but it came at the cost of a bad user experience:  $1.2 billion in declined card-not-present transactions every year and 62% of cardholders who abandoned a card or experienced a decrease in their willingness to pay after a failed transaction. 3D Secure 2.0 came to solve these problems. This robust authentication protocol is an updated version that is built around mobile devices and modern trends. Does it hold to this promise?


by Nikolay Pohlupkov 09 Sep 2020


With the European payment services directive being active since 2019, merchants and card schemes are gradually starting to support the new version of 3D SecureIn a nutshell, 3DS2 brings enhanced user experience and better security. The protocol is supposed to combine these two features seamlessly. Let’s begin with some of the improved security that 3DS2 offers.


Real-time decisions and biometrics

The first significant improvement comes in the form of Risk-Based Authentication (RBA). An exchange of over 100 data points happens during a transaction. For example, user geo-location, device ID, shipping address, previous transaction history, etc. all assess the risk for that specific transaction. Risk-based authentication allows card issuers to authenticate transactions without asking for any additional information on the majority of payments. When a transaction is considered risky, the authentication requires an extra step, where the user may be prompted to provide further verification. According to Visa, around 5% of transactions need additional verification, such as a one-time-passcode.


Another significant advancement comes in the form of biometrics. To be compliant with Strong Customer Authentication (SCA), every payment has to identify who initiated the transaction. This requirement brought together next-generation security and digital payments for a safer, faster, and more convenient shopping experience. Trends show that by 2024 66% of the smartphone owners will use biometrics for authentication. 3D Secure integrates fingerprints, facial, and voice recognition directly in the payment flow. The number of card-not-present fraud transactions will inevitably decrease, while users will have higher shopping satisfaction.


How is 3D Secure 2 better?

One of the biggest shortfalls of 3D Secure 1.0 was that it didn’t see wide adoption. For 55% of non-3DS-users, customer experience was the main roadblock to adoption. The new version of the protocol changes that by addressing precisely this issue.


Improved shopping experience – With more people shopping through apps, 3D Secure 2.0 improves their shopping experience by authenticating app-based transactions quickly and seamlessly. Additionally, businesses can be whitelisted. The trusted merchants will be exempt from 3D Secure. This allows customers who regularly shop with a given business never to need additional authentication from that point forward.


3DS2: A customer-centric protocol


Frictionless authentication – This new protocol gives the customer better authentication options in risky transactions, like using a biometric or one-time password. The single authentication checkout process is mobile-friendly and intuitive. Rather than clicking through a browser redirection process, 3D Secure payments allow customers to go through a single authentication message flow.


To sum up

Additional security, less false declines, and reduced cart abandonment bring a better experience for cardholders and merchants. As a result, there is a brighter future for 3D Secure as a tool to combat fraud while ensuring a great customer purchase experience.


We know how important security is online, especially with financial transactions. That’s why all of our cards come with 3D Secure enabled out of the box. You can focus on building relationships with your customers while we focus on keeping your funds safe.


If you want to find out more about the features, Payhawk offers, book a demo with us.

Written by Nikolay Pohlupkov

September 9, 2020

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