We get this question a lot, and it's not an unreasonable one either. So, what is EMV 3-D Secure? Glad you asked.

EMV 3-D Secure, or as it's commonly known "3DS" (or 3DS 2.0 to be more specific) is a security protocol that allows card issuers to authenticate consumers without adding friction to the payment process. 

Think about the chip and pin on your physical credit card. It's that, but for eCommerce. 3-D Secure makes sure that you, are you, when making a purchase online.  Often known by its branded names (ie. Visa Secure, MasterCard Identity Check, American Express Safekey and Discover Protect Buy),  3-D Secure authenticates cardholders to secure purchases, and prevent card-not-present (CNP) fraud.

Different Versions of EMV 3-D Secure

3DS1 had been continually patched as technology and consumer habits changed; however, from its first iteration it has always had issues. It was created well before we all had smartphones, and consumer habits were strikingly different when it was conceived. Basically, it wasn’t a great user experience, and created friction at checkout. This led to shopping cart abandonment, directly impacting sales revenue. At the heart of these issues was a basic problem of performing user authentication, where more data is needed to ensure a purchase is safe, without disturbing the consumer.

3DS2 addresses these shortfalls, and has been designed specifically for remote commerce transactions—both those currently utilized in the payments industry, and those anticipated to be more common in the future. By enabling the exchange of greater contextual data between the issuer, the merchant, and the cardholder’s bank, the second version of EMV 3D Secure reduces fraud, including fraudulent chargebacks, without creating friction at checkout. All of this happens in real time via risk-based authentication methods.

Importantly, EMV 3-D Secure allows this process to happen in fractions of a second without interrupting the customer experience at checkout.

By the Numbers

• $200 billion - sales that are lost each year in the U.S. due to friction at checkout.

• 95% - of transactions authenticated according to Visa, which leads to significantly less shopping cart abandonment.

• 28% - of the 400 billion worldwide online transactions were high risk, meaning whether or not they were fraud couldn’t be verified

• 1 in 5 - discretionary dollars spent by consumers on digital commerce

• 30.7 billion - IoT connected devices in use worldwide

To sum up, there are a lot of transactions happening online every second of the day across the world. EMV 3D Secure's purpose is to make those transactions as safe as possible.

How EMV 3-D Secure Helps Merchants

Data provided by Visa demonstrates an uptick in authorization rates of 8% when using the second version of EMV 3D Secure. Mastercard reported an increase of 11%. This is due to additional data provided to the issuer by the protocol.

More information allows issuers to make better informed decisions, which increases the authorization rate by feeding the issuer’s neural networks with this additional data, ultimately resulting in fewer false negatives (declining good transactions) and identifying bad transactions.

This is a win-win for merchants and consumers.

Secondly, EMV 3D Secure provides merchants with fraud liability protection for chargeback codes: Visa 10.4, MC 4837 and MC 4836. This means chargebacks that fall under these codes will not hit the merchant account.

On their own, the above benefits make 3DS2 nearly essential for merchants.

It is important to note, on October 17, 2021, fraud liability protection for merchants submitting transactions using Visa Secure with 3-D Secure 1.0. ended.  If you are using version 1.0 you must upgrade to 3DS2 to continue to receive protection on Visa transactions. For their part, issuers in the U.S. have been required to upgrade to 3DS2 as well. 

Overall merchants, processors, and gateways will need to have 3DS2 implemented to take advantage of the benefits of 3-D Secure. While not a legal requirement, parties within the payments ecosystem need to begin to utilize 3DS2 as soon as possible to benefit from this systemic improvement.

Given the relative complexity of the payments ecosystem, and the massive changes we see in regards to e-commerce, it can be a lot to take in for merchants entering e-commerce or looking for better payment solutions. And the myriad acronyms and initialisms of varying parties and regulations can be a bit dizzying. But it doesn’t have to be.

To say it simply, if you rely on e-commerce as part of your business, you should be looking for a 3DS2 solution today. Its solutions will reduce friendly fraud and shopping cart abandonment, while increasing authorization rates. You don’t want to wait until the last minute and then get caught scrambling. You can implement 3DS2 now, start reaping the benefits, and stay ahead of the game.

If you have any questions or want to learn more about EMV 3DS contact us today.