In the rapidly evolving digital landscape, secure payment processing has become a critical consideration for merchants in online retail. One such innovation, designed to provide higher security for online transactions, is 3D Secure. As card-not-present transactions become more prevalent, understanding the role and operation of 3D Secure for merchants is imperative.
In this blog, we will explain what 3D Secure is, how it works, and how merchants can benefit from using it.
What is 3D Secure?
3D Secure, an acronym for “Three-Domain Secure,” is an authentication protocol designed to increase security for online card-not-present transactions. Introduced by Visa and subsequently adopted by other major card companies, this protocol seeks to provide an extra layer of protection against fraud, facilitating safer and more secure online transactions.
How does 3D Secure work?
The three “domains” in 3D Secure are the acquirer domain (the merchant and the bank to which money is being transferred), the issuer domain (the bank which issued the card being used), and the interoperability domain (the infrastructure provided by the card scheme to facilitate and support the 3D Secure protocol).
In a 3D Secure transaction, after the cardholder enters their card details, the online merchant’s bank (acquirer) communicates with the cardholder’s bank (issuer) via the card scheme’s infrastructure. The issuer verifies the cardholder’s identity, typically through a password, biometric data, or a one-time PIN. Once authenticated, the transaction is approved and processed. This added step significantly reduces the risk of fraudulent transactions.
3D Secure 1 vs 3D Secure 2 (3DS2)
3DS2, or 3D Secure 2, is the updated version of the 3D Secure authentication protocol. It was designed to improve the online payments experience by reducing the need for cardholder participation during authentication and making transactions smoother and more secure.
Benefits of using 3D Secure for merchants
Implementing 3D Secure for merchants has multiple advantages:
Enhanced security
By adding an extra layer of verification, 3D Secure greatly minimises the risk of fraudulent transactions, protecting merchants from financial losses and reputational damage associated with fraud.
The shift in liability for fraudulent transactions
In a traditional online transaction, the merchant is usually liable for fraudulent activities. However, when 3D Secure is utilised, the liability shifts to the card issuer, providing additional financial protection for merchants.
Greater customer spending
Customers who shop online want assurance that their financial information is secure. 3DS provides this by adding an extra layer of authentication to online transactions. A merchant that uses 3DS communicates that they care about security.
Compliance with regulatory requirements
The revised Directive on Payment Services (PSD2) mandates stronger customer authentication for online payments. In the European Economic Area, online transactions must use ‘Strong Customer Authentication’ (SCA), except in certain low-risk situations. The 3DS protocol, especially its latest version, 3DS2, is designed to meet this requirement avoiding potential penalties and ensuring uninterrupted service for customers.
How to implement 3D Secure
To implement 3D Secure, merchants typically need to work with their payment service provider (PSP). Most PSPs offer 3D Secure as a feature of their payment gateway solutions, though the specific method of integration can vary.
Merchants should ensure their checkout process is designed to accommodate the extra verification step, maintaining a smooth user experience. It’s essential to communicate the purpose of this additional step to customers, helping them understand that it’s for their security.
Moreover, each card scheme has a version of the 3D Secure protocol (such as Visa’s ‘Verified by Visa’ and MasterCard’s ‘MasterCard SecureCode’). Merchants need to register for each one to ensure maximum coverage.
Implementing 3D Secure isn’t just about installing software; it’s about creating an environment where online fraud prevention is part and parcel of your operations. As merchants navigate the challenges of the digital commerce landscape, robust, secure payment processing solutions like 3D Secure are indispensable tools in their arsenal.
This process requires a thoughtful approach to integration with your existing payment systems and choosing the right payment service provider (PSP) that suits your business needs.
When choosing the right 3D Secure solution, consider factors such as ease of implementation, cost, customer experience, and the level of security provided. By carefully assessing your business needs and the available 3D Secure solutions, you can implement a system that enhances transaction security while preserving customer satisfaction.
Key takeaways
3D Secure is a valuable tool that can help merchants protect their businesses from fraud and financial losses. By implementing 3D Secure, merchants can enhance their customers’ experience and build trust and confidence in their brand.
By enabling 3DS with Trust Payments, you can protect your business from fraud with our innovative AI-powered software. Expand your business globally quickly and easily with fewer risks associated with credit cards and local payment methods.
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