Thursday, May 19, 2022

Digital Payment Fraud Prevention with 3D Secure 2.0

With everything going digital in 2020 with the pandemic, preventing fraud has become extremely important for any business. Fraud not only drains revenue but also makes an unfavourable impact on the minds of the customers. Then, the business might be targeted multiple times as the fraudsters have now got an easy score.

This is the reason why effective fraud prevention is a goal for most companies. For this to be implemented, businesses need to stay on cutting edge technology for fraud prevention.

There are a number of tools available in the market to prevent fraud related to digital payments. However, the most effective of them for businesses in digital payment is 3D Secure 2.0.

What is 3D Secure 2.0?

3D Secure 2.0 is a protocol that lets merchants transmit detailed transaction information securely. This is sent to issuing banks that lets merchants take full advantage of the bank’s advanced fraud analysis tools.

This technology has been developed by Arcot Systems and Visa. It supports improved translation security and has been adopted and implemented by all the major card networks under different names some of them include ProtectBuy and SafeKey.

This technology is named 2.0 because the first version of this had major issues. It had limitations like it could not identify the customer’s identity when the bank fraud analysis showed that the transaction was risky. It resulted in increased instances of cart abandonment. Also, the first version only supported the transmission of 15 types of transaction data. So the analysis that could be done was limited.

3D Secure 2.0 fixes this problem and it has some additional features. This is why it is a more attractive option for the merchants especially as more customers are now using their smartphones to make purchases.

How did 3D Secure 1.0 work?

With the first version of 3D secure customers had to opt-in to the program with their issuing bank and a pin was assigned to them so that they can use the card online in a secure manner.

This created two major issues for E-Commerce merchants.

1. If the customer forgot his/her pin then the transactions were declined.

2. The order approval time was increased because customers were redirected to the card network websites right from the merchant’s checkout page so that they can approve the transaction.

If one wanted to prioritise the ease of use then 3D Secure 1.0 was not at all convenient. However, it was widely used and accepted by various Asian and European merchants. It is still used by some merchants outside the USA.

How does 3D Secure 2.0 work?

Source: Visa

The 3D Secure 2.0 is frictionless, allowing merchants to verify a transaction with the issuing bank in real-time. It uses two factor authentication to confirm the customer’s identity when needed.

It also supports the transmission of more than a hundred pieces of information to the issuing bank as opposed to 15 for the first version. This led to more effective risk analysis.

Therefore the customer experience is smooth with this. Also, the cardholders need not remember their passwords to facilitate their transaction.

To enable 3D secure 2.0 a JavaScript code is inserted into the merchant checkout page. When the customer provides their details of credit card then this information along with the digital footprint like the IP address, machine address and such are sent to the cardholders’ issuing bank. This is done to validate the transaction.

When the transaction is approved the customer sees a processing indicator for some time which is then followed by a checkmark indicating approval. If the issuing bank thinks that the transaction requires additional verification then the customer might get a text message with a one time code. They might be asked to scan their face or fingerprint for biometric authentication. In any case, it is a process with which many customers are familiar. This is rather easy as they do not have to remember the static PIN.

What are the benefits of 3D Secure 2.0?

3D secure can prevent fraud charges and shields the merchant from additional payment if a customer is not truly authenticated.

Also if the transaction verified by 3D Secure technology turns out to be fraudulent then the issuing bank is responsible. The merchant is not.

A common concern among E-Commerce merchants is ‘Not Authorised’ codes. Using 3D secure decreases the number of such disputes that merchants might have to deal with.

One thing that is worth noticing here is that 3D Secure can provide protection from only ‘Not Authorised’ codes. If you are a consumer and there is some other dispute you can still file a complaint on the grounds of customer service issues or merchant error.

Therefore the issuing Bank must also be 3D Secure enabled in order to verify the transactions of the consumers. If the cardholders’ bank is not 3D Secure enabled, then the transactions will show a non-verified response. In this case, merchants are not protected from fraudulent transactions. They are not secured.

Why should you use 3D Secure 2.0?


The merchant who gets a higher number of chargebacks with a ‘Not Authorised’ reason code will benefit the most from this technology.

Some of the major such reasons include:

1. More sales and less friction: 3D secure 2.0 enables purchases to authenticate themselves. This process is very easy, simple and less time-consuming. This frictionless technology decreases cart abandonment rates of e-commerce websites.

2. More data means greater authentication accuracy: since the data collected is relatively more, issuers can more precisely determine the transaction’s risk. A survey done by Visa shows that 95% of transactions are straightaway approved. It also mentioned that cardholders experience 40% less fraud.

3. It is built for mobile: with the pandemic, the number of smartphone users is increasing. Now browser redirection and poor screens will not help the consumers. 3D Secure 2.0 has added support for authentication in mobile apps. This means that the consumers who are using their smartphones will have a smooth experience.

Some of the industries that are benefited the most from 3D secure 2.0 technology are as follows:

  • Health and beauty
  • Insurance
  • Electronics
  • Gaming
  • Digital goods
  • Digital subscription
  • Digital Services
  • Luxury goods

How long does it take to set up 3D Secure?

The integration process and the setup takes around 2 to 5 business days. It depends upon the service provider. The JavaScript code is provided and it needs to be inserted on the checkout page so that 3D Secure can be enabled. All this process does not require and need experienced developers. Even an entry-level developer can complete this process in a few hours. You need to contact your bank and a visa representative to get registered with 3D Secure 2.0.

Should you learn about this course?

3D secure prevents fraud in transactions. It is desirable for banks, merchants and customers. With everything going digital in the 2020 pandemic, this technology is needed more than ever. So the answer to the above question is yes.

Why should you enroll in the GFA course?

Global FinTech Academy aims to make the knowledge behind Financial Technology available to all. We offer a range of courses that make the understanding of Technology easier for you. You can use this to strengthen your career, knowledge, disrupt the FinTech market with new and innovative product/s that are full of potential, or for literally anything. The good news is you get to learn all this in an easy language and from ground zero. Our aim is to deliver the best knowledge to you in the easiest way possible.

 Here, you will learn about:

  • Three Domains in the 3D Secure
  • 3DS Domain wise Transaction Flow
  • Important Terminologies in the transaction flow
  • 3DS Transaction flow by VISA
  • Step wise transaction details
  • Transaction Logic 3DS 1.0
  • Transaction Logic Flow 2.0
  • Liability Shift in 3D Secure
  • 3D Secure explained through Stripe Video
  • Data points captured in 3D secure 1.0 and 2.0
  • Benefits of 3D Secure 2.0 for FIs, Merchants and Customers

With the increasing number of Digital Payment tools and use cases, we are also becoming prone to newer frauds and risks. New age fraudsters and hackers are smarter and we need to protect ourselves by being one step ahead of them. Card Not Present Transactions (CNP) in e-commerce is the most affected industry with the number and volume of fraudulent transactions.

In this business-oriented course, we will understand what 3D Secure (3DS) 2.0 in Digital Payments is, and how it helps in reducing fraudulent transactions.

What is 3D Secure, Card Present and Card Not Present Transactions, 3 Domains of 3D secure, important terminologies and transaction flow, transaction flow steps in detail, Liability shift explanation, EMV 3D Secure, data points in 3D secure, 3D Secure 2.0 and Second Payment Services Directive (PSD2) of European Union Strong Customer Authentication (SCA), 3D Secure (3DS) 2.0 in Digital Payment Security – FinTech, Business Oriented Course on 3D Secure (3DS) 2.0 in Digital Payments. FinTech, Payment Processing.

We are excited to simplify the most talked-about 3D Security in digital payments.

To get this course for USD10 only, apply code GFA10 at the checkout page.

Get it HERE

Expecting to meet you on the other side of the course!

You can access this course on Udemy as well – Click Here



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