Fraud Prevention Guide: 3-D Secure (3DS)
3-D Secure (3DS) authentication shifts fraud-related chargeback liability to the card-issuing bank, providing added protection for merchants. If the issuing bank flags a transaction as risky, a challenge flow is triggered to verify the cardholder’s identity. According to card brands, approximately 95% of 3D Secure transactions are completed frictionlessly.
What is 3-D Secure (3DS)?
3-D Secure (3DS) helps prevent online fraud with card-not-present transactions. When enabled, a cardholder is required to authenticate their identity before the transaction can be completed.
The three domains of 3-D Secure (3DS) represent the key stakeholders in the authentication process for online card payments:
Issuer Domain
The cardholder’s bank or financial institution responsible for verifying the cardholder’s identity during the transaction.
Acquirer Domain
The merchant’s bank or payment processor facilitating the transaction on behalf of the merchant.
Interoperability Domain
The infrastructure that connects the issuer and acquirer, typically managed by the card networks to enable secure communication and authentication.
How does 3DS work?
First, the cardholder enters their card information to complete payment.
- If the card-issuing bank deems the transaction is low-risk, they approve the transaction.
- If the card-issuing banks deems the transaction high-risk, they may request additional verification.
Verification methods vary by bank but are user friendly for genuine cardholders. Once the cardholder is authenticated, the bank approves the transaction.
According to card brands, approximately 95% of 3D Secure transactions are completed frictionlessly.
Where is 3DS available?
The Strong Customer Authentication regulation, as part of PSD2 in Europe and similar regulations in the UK, India, Japan, and Australia, might require using 3DS for card payments.
3DS is optional in other regions, like the United States, but it's highly advised for all merchants to enable 3DS as a tool to reduce fraud.
3DS is often recognized with branding of Visa (Verified by Visa), Mastercard (Secure Code), and American Express (SafeKey), Discover (ProtectBuy).
What are the benefits of 3DS?
3DS is a critical fraud prevention tool that helps verify cardholder identity during online payments, significantly reducing the risk of unauthorized transactions. Beyond added security, 3DS offers a liability shift for fraud-related chargebacks, protecting your business from financial losses.
Reduce Fraud and Save Thousands
Implementing customer authentication like 3DS not only reduces fraud risk but also safeguards against revenue loss due to fraud-related chargebacks.
Shift Payment Liability from Your Business to Card Issuers
3DS shifts chargeback liability from the merchant back to the card issuer. If the cardholder disputes a transaction for fraudulent reasons, the issuer is liable for the funds instead of you.
Increase Customer Trust
As e-commerce activity inevitably increases, it’s important to implement the strongest security measures possible, including 3DS, to protect your customers and their information.
Comply with EU’s PSD2 Mandate
Global merchants must meet the EU’s requirement for SCA (Strong Customer Authentication) and implement it across all regions where they do business.
“Sertifi allows our sales and catering group to collect signed contracts 96% faster and capture payments within one day. I always have previous employees reaching out to me because they want to add Sertifi.”
TRACY DUPLECHAIN, DIRECTOR OF SALES, AC HOTEL NEW ORLEANS BOURBON / FRENCH QUARTER AREA
How do I get started?
Here at Sertifi, we make it easy for you to accept online credit card transactions securely and frictionlessly and take advantage of fraud prevention methods like 3DS. Please get in touch with our team to learn more and get started.