As more and more connected devices become tools for handling payments, it’s fair to say that digital commerce is quickly becoming one of the fastest growing areas.
Regardless of whether you’re using a browser, mobile app or connected device, consumers have more ways to pay than ever before. It’s expected that the 6 billion devices of today will exceed 20 billion within the next 3 years. There’s one issue though. When digital purchases are made outside of a traditional store, identifying the customer and verifying the transaction is both important and challenging. Research from the world of eCommerce suggests that half of online transactions declined due to fraud are actually legitimate.
With that in mind, it’s more important than ever that the payments industry as a whole continues to invest in preventing fraud while still maintaining the speed and convenience consumers have come to expect when shopping online. Allowing transactions to happen quickly whilst still being able to help issuers identify the difference between a good and bad transaction is key.
That’s where 3D Secure 2.0 comes in – it’s a crucial step forward in these efforts to minimise fraudulent activity in the world of eCommerce.
How Does 3D Secure 2.0 Work?
Well, in simple terms, it’s a sophisticated anti-fraud intelligence system. The original 3D Secure has been around for a number of years. Its purpose is to allow financial institutions, payment networks and digital merchants to analyse and communicate securely about transactions that may appear fraudulent.
The latest version, 2.0, delivers a real-time and secure information pipeline between merchants, allowing a huge number of transactional attributes to pass freely between them – this in turn allows issuers to authenticate customers much more accurately, without the need for passwords or further information.
Both merchants and issuers have tested and refined their solution over the last few years and the current Visa rules for merchant-attempted 3D Secure 2.0 transactions have been in place since April 2019. Visa themselves have already committed to working with their clients and global partners to support 3D Secure 2.0 solutions, with a clear focus on delivering improved payment security and a higher level of authorisation. It is their belief that the world of seamless digital payments is not too far away.
What Are The Benefits?
The beauty of 3D Secure 2.0 is that it allows businesses and their payment provider to send specific data elements directly to the cardholder’s bank – anything from shipping and delivery data through to contextual information like the customer’s device ID or previous transaction history. The cardholder’s bank can then use this data to assess the individual transaction and choose one of the following options:
- If the bank is satisfied there is enough data to trust that the cardholder and transaction is genuine, then the payment enters ‘frictionless flow’ and is completed with no additional input required from the cardholder.
- If the bank feels it needs further evidence that the transaction is legitimate, the payment is sent through ‘challenge flow’ where additional input from the cardholder is required for the transaction to be processed successfully.
Although this type of risk-based analysis was already present within the original 3-D Secure version, the amount of data available through the new 2.0 update is significantly increased, therefore increasing the likelihood of genuine transactions being processed without additional cardholder input.
Furthermore, 3D Secure 2.0 was developed following the rise of the smartphone and therefore takes into consideration the associated challenges. The system allows banks to offer innovative authentication experiences via mobile banking apps (often referred to as ‘out-of-band authentication’) – this means that instead of the need to enter a password or receive a text message, the cardholder can validate a payment using fingerprint or even facial recognition technology like that used on the latest iPhones. It’s increasingly likely that high street banks will support these more advanced authentication experiences via 3D Secure 2.0 to enhance the customer experience.
Here’s a short video of this in action:
Both merchants and issuers have tested and refined their solution over the last few years, and the current Visa rules for merchant-attempted 3D Secure 2.0 transactions have been in place since April 2019. Visa themselves are committed to working with their clients and global partners to support 3D Secure 2.0 solutions, with a clear focus on delivering improved payment security and a higher level of authorisation.
It is their belief that the world of seamless digital payments is not too far away.