Explained: 3D Secure 2 (3DS2)

The more you sell online, the more opportunities there are for fraudsters. Luckily, there are measures you can take to protect your customers and secure your revenue. One of these measures is 3DS2. 

3DS

First introduced in 2001 by EMV, 3D Secure, known by its acronym 3DS quickly became the standard anti-fraud measure in the industry. So how does 3DS work? Whenever customers initiate a purchase on the web, they are redirected to a secure page on their card provider’s website. Here, they are prompted to either enter a password or an authentication code that is sent to their mobile phone. Once the information is verified, the payment is approved and customers are redirected to the merchant’s website.

By adding a security layer to online transactions, 3D Secure made it a lot harder for fraudsters to steal, it lowered transaction costs, increased trust among online customers shifted liability away from merchants. And yet, it also had various drawbacks that only became worse in time.

For the average consumer, being redirected to a separate website and asked for a code turned out to be less straightforward than expected. This leads to abandoned carts and lost revenue. Moreover, when it was introduced in 2001, mobile commerce was non-existent.

3DS2

The follow-up to the original 3D Secure brings much-needed improvements to security and user-friendliness. To grasp these changes, we need to understand what 3DS2 is meant to accomplish. The new standard, 3DS2, has been developed in line with the regulations outlined in the European Union’s Revised Payment Services Directive (PSD2).

PSD2 outlines the rules and regulations by which all players within the European payments industry must abide by in order to protect consumers, secure payments and foster healthy competition within the market.

One of the practical results of the Revised Payment Services Directive is the development of Secure Customer Authentication (SCA) as a European regulatory requirement. For transactions to comply with SCA, customers are required to identify themselves using multi-factor authentication. In other words, they must present two out of three of the following identifiers: Knowledge (Something they know, e.g. password/PIN), Possession (Something they own, e.g. mobile phone, token), Inherence (Something they are, e.g. biometrics, voice/facial recognition).

In other words, 3DS2, the new version of 3D Secure, is meant to be SCA compliant. Being SCA compliant has many benefits that go beyond fraud prevention. With 3DS2, issuing banks are provided with over 100 data points that help them identify users and authenticate payments.

 

For a more thorough explanation of 3DS2, check out the following resource:
https://3dsecure2.com/