Digital commerce is exploding right now as consumers continue to use mobile devices to do their online shopping. With more options than ever when it comes to ways to pay and the need to verify transactions and prevent fraud from occurring. It’s more important now  that businesses find new ways to do that so their customers stay safe while shopping online. One way companies are doing it is using fraud detection intelligence like 3D Secure. This allows merchants distinguish legitimate transactions from fraudulent ones. 

Let’s take a look at the importance of customer authentication. Then we will discuss exactly what 3D Secure is and how it works. 

 

Customer Authentication

Customer authentication allows banks to request extra details from the cardholder to verify a purchase. Authenticating payments reduces the risk of fraud and can reduce the number of disputes a merchant receives. This form of authentication is used in dozens of countries around the world, including Brazil, Mexico, Singapore, the U.S., and more. 

The authentication process usually involves sending a code to the cardholder via text message, email, or phone. 

The following information is typically required:

  • Something they know (e.g. password or security question)
  • An item they own (e.g., phone or hardware token)
  • A unique feature for who they are (e.g., fingerprint or face ID)

What Exactly is 3D Secure?

3D secure is a protocol designed to be an additional security layer for online credit and debit card transactions. The name refers to the “three domains” which interact using the protocol: the merchant or acquirer domain, the issuer domain, and the interoperability domain.

 

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How Does 3D Secure Work?

3D Secure uses XML messaging and SSL communication to authenticate transactions while making them more secure. Once your customers make a purchase and check out, they’ll be prompted to enter their Verified by Visa or MasterCard SecureCode (if they used that payment method). Once your customer provides that information, they’ll be redirected to the card issuer’s website to complete the authorization process. Or, the authorization is completed within whatever payment solution you’ve chosen for your business. If your customers pay with a Discover card, American Express card, or a gift card, they will not be promoted to enter a password. 

Customers not enrolled in Verified by Visa or MasterCard SecureCode will be prompted to enroll and create a password. Your customers will have a certain amount of times they can opt out of creating a password, but once they reach the maximum, they’ll no longer get that option and they’ll have to create an account. The number of times they’re allowed to opt out is up to the card issuer. 

It’s up to you, however, to determine which transaction will require 3D Secure authentication. 

How 3D Secure Can Benefit Your Business

The types of businesses that would benefit most from using 3D Secure are businesses that accept online payments. If you own a retail business and you accept payments online, you can use 3D Secure to help authenticate payments.

Chargeback Protection

Once you start using Verified by Visa, you’ll never have to worry about chargebacks. By using it, you’re securing your business against not only chargeback fraud, but friendly fraud. Unfortunately, MasterCard doesn’t have the same policy.

Liability Shift

When a chargeback occurs, you probably already know that you’re liable for it. By implementing 3D Secure, you shift liability from you onto your issuing bank, which is good news for any business owner. Any payment that’s been successfully authenticated using 3D Secure is covered by this shift. 

Even if a 3D Secure payment is disputed as fraud by the cardholder, the liability would also shift from you to the card issuer. In cases like these, the dispute would be handled internally and wouldn’t appear in the Dashboard. You also won’t have to worry about funds being withdrawn from your Stripe account. 

Interchange Benefits

Using 3D Secure for Visa or MasterCard can also provide interchange benefits in the form of lower interchange fees and longer payment terms with your acquirer. 

Increased Customer Confidence

Increased customers confidence is just another perk of using 3D Secure to protect your business. Customers want to know that their personal and financial data is safe. As a result they’ll be much more confident if they know you’ve taken special measures to provide an extra level of security for protection.

 

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Out with the Old, In with the New

Previously, 3D Secure was limited when it came to user experience (it was pretty much non-existent). Some users weren’t able to view the 3DS authentication page on their mobile devices and authorization page loading speeds caused issues and, subsequently, headaches. Not to mention, compatibility issues occurred when the authentication process was conducted on mobile browsers and users weren’t too happy about the extra steps it took just to complete a purchase (to the point that they’d quit the purchase midway through). 

Thanks to some upgrades to 3D Secure, things run a lot more smoothly these days. For starters, authentication activity won’t be visible to the cardholder (biometric authentication in the merchant’s app will just feel like a valid security measure). With the addition of an SDK component, comprehensive integration with mobile apps is possible. This allows merchants to natively integrate 3D Secure into their mobile apps.

The new 3D Secure has dramatically improved the user experience on mobile devices, including non-browser-based platforms and mobile integration. And now merchants can ensure that the authentication process looks and feel consistent with the rest of the app. Furthermore, the merchant’s platform only requires additional authentication if the risk is high. This only happens in a small percentage of the transactions.  

 

Future Features

In the future, 3D Secure will provide frictionless flow. It will perform risk-based authentication, which means issuers will be able to improve a transaction without the need for input from the cardholder. No more annoying pop-up windows or trying to remember passwords. 

Another feature you’ll be able to look forward to is non-payment authentication. This means 3D Secure will be used for more than just online transactions. 

 

Step into the Future of Online Payments

In this new era of online payments, it pays to take the necessary steps to secure your company (and its finances) and protect your customers when they shop online with you. Start implementing the processes and security measures you need to see your business truly thrive by adopting the newest, most secure technology available.

 

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