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3D Secure 2.0

3D Secure 2.0


Abdullah Abdelkafi


02 May 2019

Read time

4 Minutes



3D Secure 2.0 is stronger, more intelligent fraud-detection intelligence. It makes better risk decisions and enhances the customer experience in doing so with less need to authenticate their identity.

3D secure 2.0 is a new standard and offers a new approach to authentication through a range of data and biometric authentication.

Fraudsters are focusing on card-not-present transactions (CNP). There has been an increase in card-not-present transaction now that consumers are using their devices as a payment method. Today there are six billion connected devices for CNP payments and in the next three years, this will increase to 20 billion. CNP payments have meant that verifying customers identity has become a challenge.

Industry research estimates that currently, half of the digital commerce transactions that are declined due to suspect fraud are actually legitimate transactions.

**What does 3D Secure 2.0 mean for Payments?**

3DS 2.0 allows banks to verify card owners during the transaction process. The system helps merchants transacting in Europe meet stronger customer authentication requirements under the second payments serviced directive. It will also improve the process of mobile purchases.

The new 3D Secure 2.0 is smarter, faster and simpler to use across all connected devices. It delivers 10X more data than 1.0, this data includes elements such as device, channel and payment history. This speeds up the authentication process and also boosts security. An increase in secure payments are especially valuable in [high risk companies.

**How will it work?**

The cardholder attempts to pay a merchant and the merchant will then send the cardholders details and cost of the transaction to the issuers 3D 2.0 Secure provider. The 3D 2.0 system will conduct a risk-based authentication which enables issuers to get additional data from transaction context as well as the merchants and cardholders risk profiles.

The improved system will take into consideration the email, billing and shipping address as well as the cardholders consumer behaviour. The process offers a more informed risk analysis, in order to make better risk decisions.

The authentication result will then be sent back to the merchant and the merchant will either accept or decline the transaction.

**What is the Difference Between 3DS 1.0 and 3DS 2.0?**

1.0 connects merchants, payments networks and financial institutions in order to authenticate transactions and share data. 2.0 is simply an improvement of this, with a focus on mobile payments especially.

2.0 supports seamless authentication challenges, which can vary from an app switch over to a one time password sent via SMS.

This is done by asking banks to accept and utilise a large number of data points in a risk assessment to determine if a challenge is warranted. These data points will be things like email address, billing as well as device and browser data. The idea is that, if the banks have sufficient data on the customer attempting the transaction, this will reduce the need for authentication.

Not only this, the new system is not reliant on static passwords and enables consumers to make online purchases without signing into an account. 2.0 offers a more customer-centric solution through making payments as easy and seamless as can be.

**How does 3DS 2.0 help Merchants?**

Businesses in Europe need to comply with PSD2 Strong Customer Authentication requirements. Enabling 3DS 2.0 helps ensure they’re adhering to those requirements.

Visa reports that merchants using 3DS 2.0 experience a 70% decrease in cart abandonment, and an 85% reduction in transaction time. A massive improvement in conversion rate optimisation and a clearly improved experience for consumers.

When the merchant, issuer and cardholder provide more context around a transaction, everyone wins. You get faster checkout times, added security and improved sales.

1.0 only worked with browsers, so this didn’t allow for mobile payments made via smartphones or watches. Being able to put more transactions through the secure system means that there will be a shift in fraud liability to the issuer and higher authorization rates for 3DS transactions.

Merchants will have to take on the liability risk if a purchase ends up being fraudulent, but it will mean a better and quicker experience for their trusted customers. Frictionless payments are needed more than ever with in-app purchases and mobile wallet payment like Apple and Google pay estimated to grow by 33.4 % by 2022.

3DS 2.0 really is a great improvement that enables security and ease for both merchants and consumers.

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