Hotel Payments Series: Why U.S. Merchants Should Adopt 3-D Secure

In this post, we’re delving into a lesser-known fraud prevention method for the United States: 3-D Secure. Otherwise known as 3DS, 3-D Secure is a security standard you can adopt to secure online payment transactions and authenticate charges. The best part: most cardholders are automatically enrolled for 3DS by their card issuer, so taking advantage of 3DS is easy for merchants.

So why are so many U.S. merchants slow to adopt? 3DS got off to a rocky start in the early 2000s, which I personally believe is slowing adoption in the U.S. Plus, without a mandate like in Europe, there’s little education from the card brands around 3DS’ benefits and little urgency to adopt it with U.S. merchants.

As a payment vendor, an important part of our role is ensuring you understand the practices you can take advantage of to secure your business and minimize your risk of hotel fraud and chargebacks – all while maintaining a frictionless payment experience for your guests. Consider this post your one-stop guide for what you need to know about 3DS.

Why was 3-D Secure introduced?

The goal of 3DS is to better authenticate transactions to reduce the risk of unauthorized charges. This protects everyone involved in the transaction: you, your guests (cardholders), and the banks. You and your guests enjoy a safer payment experience with a minimally invasive authentication process, and everyone benefits from the reduction of fraud and chargebacks.

How does 3-D Secure work?

3DS helps verify that the owner of the card is making the transaction, following these steps:

1. The cardholder enters their credit or debit card information into a merchant’s website form.
2. The system checks if the card is enrolled in 3DS.
3. If enrolled, the cardholder is prompted on-screen to validate themselves.
   • Methods vary by issuer, but it’s typically biometrics, such as fingerprint mapping, or a temporary code.
4. Cardholders will generally be prompted on their phone number, so only the person who has access to the account or device can access the code.
5. If the cardholder successfully authenticates their identity, the transaction resumes on the merchant’s website.
   
   

How is 3-D Secure currently available in the US?

While it isn’t yet mandated for merchants in the US, 3DS is available from all major credit card networks and most issuing banks. Many card networks have packaged 3DS into a proprietary solution. For example, American Express offers SafeKey, Mastercard offers Identity Check, Discover offers ProtectBuy, and Visa’s Verified by Visa even helped pioneer the original protocol.

While many payment authentication solutions are available, merchants hold the power and are slowing the realization of benefits. No one can benefit if a solution isn’t turned on.

Aside from fraud prevention, what other benefits does 3-D Secure post to merchants?

3DS shifts payment liability back to the card issuer – so if fraudulent chargebacks do occur, the card issuer is responsible for mitigating the problem. This is a valuable tradeoff for implementing payment authentication. Chargebacks result in lost revenue and time; plus, you’ll avoid potential chargeback fees.

Aside from revenue and time protection, the implementation of a payment authentication step shows that you care about protecting your guests and their information. As e-commerce activity increases and fraudsters get smarter, it’s important to implement the strongest security measures possible, including authentication steps, so your guests find you reliable and trustworthy to do business with.

How can you start taking advantage of 3-D Secure?

Contact your payment gateway or processor to get started. The right e-commerce solution will take the work out of making online payment transactions secure yet frictionless, while making it easy for you access and adopt fraud prevention methods like 3DS. For example, a subscription to Sertifi comes with free advanced fraud tools, and our payment processor, SertifiPay, lets you easily prevent payment fraud Using 3DS once the solution has been implemented.