There is a lot of hope in the digital finance and eCommerce world that 3D Secure 2.0 will be the solution to fraud and unfounded chargebacks that everyone has been waiting for. While the industry is very optimistic about its possibilities, the verdict isn’t in yet: Can it really live up to the hype? Will it deliver the security and customer satisfaction improvements everyone is so excited about?
Let’s take a closer look at what exactly the situation is and if 3DS 2.0 really addresses them.
What we liked about 3DS 1.0
3D Secure technology first came onto the main industry scene over ten years ago as part of a package released by Visa in their Verified by Visa program. As a major player in the industry, they signaled that they had faith in the potential of 3D secure technology. Inevitably, other major players such as Mastercard, UnionPay and American Express followed suit with their own adaptations.
What 3DS 2.0 is promising us, is an improvement on the system, incorporating:
- increased support for app-based transactions on mobile devices
- hassle-free authentification procedures facilitated by computer-aided decision-making protocols
- an increased variety of authentication methods including biometrics and passcodes
- a smoother checkout mechanism.
The obvious upshot of all these improvements will be a great benefit for the eCommerce industry and that’s what has people excited.
Where 3D secure 1.0 fell short
Even as it was launched, 3DS 1.0 didn’t have many believers. Skeptics saw the pop-up requests for cardholder information as suspicious and many potential buyers would be scared off by it. The common occurrence of forgotten passwords also placed a lot of challenges in the technology’s way. All this coupled with people’s understandable aversion to new, hard-to-understand processes when it came to their money meant that the technology hasn’t been as fully embraced as it could be up to this day.
What does 3DS 2.0 do differently?
First, they address the password verification concern by placing it in the hands of the merchant – they decide whether they trust you or not, so you can do your shopping even if you forgot your password. Is it enough, though? Here are some more problem areas it seeks to address:
- Authorization Requirements
3DS 2.0 seeks to add another layer of verification during checkout. Reports indicate that only 5-25% of transactions will have to undergo the extra security steps, therefore the number of customers affected by this will significantly decline. Thus, reducing the number of customers that may be put off by the increased security.
- Chargeback Frequency
While the prospect of putting an end to fraudulent chargebacks might be effectively handled by an intelligent, computer-aided protocol, this won’t have an effect on the more mundane chargeback scenarios – those resulting from undelivered products, misplaced shipments, or failure to ship entirely.
3DS2 in the future
This technology will reduce the incidence of online fraud, it will have a significant impact if consumers and merchants alike understand and embrace the new protocol. 3DS2 will streamline checkout processes for customers, often they will not be aware of the authentication steps occurring in the background. Subsequently, merchants will experience reduced rates of cart abandonment, meaning higher sales for them, reduced rates of fraudulent transactions and the liability shift of these transactions from them to the card issuing bank.
Although the new technology isn’t a final solution, fraudsters will continue to develop savvy ways to scam merchants. 3DS2 is a step in the right direction, but banks and merchants will have to constantly adapt to new threats as they emerge.