The rise of online payments has increased security concerns. Plus, you become more sceptical when you open the news any day and see headlines related to scams and whatnot. This brings forth a question: Are online payments safe?
Well, with 3DS 2.0, they are. 3 Domain Secure (3DS) protocol makes it easier to authenticate users across three different domains.
In 1999, the 3D Secure (3DS) protocol was first created by Visa to enhance the security of online card payments. Credit and debit card payments still remain vulnerable to fraud even in markets where security measures like the Address Verification System (AVS) or CVC verification have been implemented. Because of this risk, customers can dispute unauthorised transactions made using their cards.
3D Secure 2.0 is an enhanced version of 3D Secure that was released by EMVCo, an association that consists of six major card networks.
What is 3DS 2.0?
The original 3D Secure protocol has been updated to 3D Secure 2.0, which offers a more efficient and intuitive user experience. EMVCo, a global organisation that promotes the acceptance and interoperability of secure payment transactions, is the developer of the new protocol. These are some of the features of 3DS 2.0.
- Comprises contemporary authentication techniques like mobile authentication, one-time passcodes, and biometric recognition. This makes it possible for a quick and safe checkout procedure.
- Possesses the capacity to gather extra transaction information, including the location of the device, the user, and the merchant’s past transactions. This lowers risk and enhances user experience by assisting issuing banks in making better-informed judgments about accepting or rejecting a transaction.
- Enhanced risk-based authentication, which enables issuer banks to establish risk limits for various kinds.
The Benefits of 3DS 2.0 Over its Predecessor
Now, there are many benefits of using 3DS 2.0 in today’s world. Primarily, it targets two types of user base, customers and merchants. Let’s understand how it affects both the user bases.
3DS 2.0 Customer Benefits
The main benefit of 3DS 2.0 is the improved possibility of frictionless authentication with more payment-specific information. This helps customers finish transactions without requiring extra information.
The redirect problem with 3DS 1.0’s payment flow has been resolved, making the experience more user-friendly when customers need to authenticate their purchase. The procedure is now integrated into the merchant checkout experience as well. Unlike its predecessor, the protocol also provides a better user experience by being more compatible with mobile devices and apps.
The fact that 3DS 2.0 was created in the context of mobile commerce, where new digital payment preferences are constantly changing, is another significant distinction between its creation and that of 3DS 1.0. This has made it possible to use more creative authentication methods to finish online transactions, like biometric authentication or banking app verification.
3DS 2.0 Merchant Benefits
With improved data flows that enable better decision-making on transactions, a better user experience would assist retailers in lowering the cart abandonment rate and make transactions easier. This should have the unintended consequence of increasing customer confidence in e-commerce settings, which will lead to more people making purchases online.
Additionally, 3DS 2.0 satisfies the standards for Strong Customer Authentication (SCA), guarantees that companies comply with the updated Payment Services Directive (PSD2), lowers the risk of fraud and chargebacks, and protects merchants from liability connected to fraud when SCA is used in a transaction.
Challenges with 3DS 2.0
Now, while 3DS 2.0 is extremely beneficial, there are a few challenges that come with it. The table below helps you understand it better.
| Challenge | What it Means |
| Liability shift is limited | 3DS only protects merchants from fraud chargebacks. It doesn’t cover service issues, delivery problems, or customer disputes. |
| Friendly fraud still hurts merchants | Most chargebacks today come from friendly fraud—over 80%—and these still fall on the merchant even with 3DS in place. |
| Low win rates in disputes | Even though many chargebacks are invalid, merchants win only about 30% of them, so a lot of money is lost. |
| Big financial impact | Chargebacks can eat up a huge chunk of revenue—sometimes as much as 25% of a business’s net income. |
| Counts toward fraud programs | Even if the issuer takes the financial hit, 3DS chargebacks still add to a merchant’s fraud ratio. |
| Risk of fines and stricter controls | High fraud ratios can lead to fines, tougher checks from issuers, and more declined payments. |
| Possible drop in approvals | When issuers see high fraud levels, they may approve fewer transactions, which affects sales. |
Conclusion
There is no doubt that 3DS 2.0 has been a lifesaver for both merchants and customers, making payments simple while simultaneously providing security. Despite the challenges, it is truly a blessing in the global payment gateway. It is always important to use payment gateways that have integrated 3DS 2.0 for maximum security.
