How to Adopt the Enhanced Version of 3-D Secure for Improved User Experience

How to Adopt the Enhanced Version of 3-D Secure for Improved User Experience

by August 21, 2020
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Changing customer expectations, the ubiquity of mobile phones and an evolving regulatory landscape are rapidly making the 3D Secure (3DS) standard obsolete. To address customers’ demand for a frictionless e-commerce experience, market participants must adopt 3DS 2.0, experts say.

What is 3DS?

Created by Visa and MasterCard, 3DS is a technical standard that adds a layer of security in online credit and debit card transactions. This would typically translate to cardholders having to prove their identity by entering a unique password, an SMS code or a temporary PIN.

The obvious main benefit of 3DS is that it protects both users and merchants from the threat of payment fraud. It also shifts the payment liability to the issuing bank, another perk for online merchants.

Despite the advantages, 3DS is also associated with higher cart abandonment rates. Since it adds an additional authentication step for customers, 3DS often hurts both conversion rates and the overall shopping experience.

“3DS … is a very clunky process,” Michael Turner, an 3DS expert and a former Visa and Bank of New Zealand executive, said during a webinar on August 12 addressing payment security in Asia Pacific (APAC). “Though the idea was to enable secure online transactions … with 1.0, there were more losers than winners. Whether that was the cardholders, people who would forget their password … the banks didn’t like that. And fraud still occurred because of static passwords, so banks lost money. The merchants had their transactions abandoned so they lost money. Most markets were generally unhappy with the 1.0.”

3DS 2.0 for the modern-day online shopper

To address these issues, the improved 3DS 2.0 standard was introduced, bringing in a new approach to authentication through a wider range of data, biometric authentication and an improved online experience.

Designed to be less intrusive than the first version of the specification, 3DS 2.0 allows more contextual data to be sent to the customer’s bank to verify and assess the risk of the transaction.

With 3DS 2.0, customers are only required to pass an authentication challenge if their transaction is determined to be of a high risk. In addition, the workflow for authentication is designed so that it no longer requires redirects to a separate page, and can also activate out-of-band authentication via an institution’s mobile app, enabling thus for biometric authentication.

“With 2.0, the user experience is incomparably better than 1.0,” Kiril Milev, regional director for the Middle East and APAC at Netcetera, said during the webinar. “1.0 was designed with a lot of specific channels in mind. 2.0 is designed for the future, so for wearable devices, and whatever comes in the future.”

“With 2.0, you allow your customers to use the features they regularly use with their devices,” whether that’s fingerprint scanning, or whatnot, Milev said. “It’s secure by design, as well … The security is built in the user experience.”

An aim at APAC’s booming e-commerce sector

Originally from Switzerland, Netcetera is a payment security leader that serves more than 2,000 banking institutions,  issuers and over 60 thousand merchants around the world, providing them with scheme certified products for 3DS, mobile contactless payment, digital wallets, digital banks, and more.

Netcetera is present across the world and recently expanded to Asia, opening its 15th location with an office in Singapore.

Until then, Netcetera had been supporting its Asian clients from Europe and the Middle East. The new office in Singapore will give it more proximity to customers, thus improving cooperation.

Dr. Andrej Vckovski, CEO of the Netcetera, said that although the firm was entering a very competitive market, its position as a 3DS market leader in the German, Austrian and Swiss (DACH) region has equipped it with the right resources and expertise to venture towards APAC.

The market is ever so ready today as COVID-19 continues to push for greater digitalization of the economy, forcing businesses to move online and consumers to turn to e-commerce.

Since the beginning of the pandemic, e-commerce retailers across Asia have seen explosive sales growth. Singapore e-commerce platform Shopee saw its gross merchandise value jump 74.3% to reach US$6.2 billion for the first quarter of 2020. The total number of orders surged to 429.8 million in Q1 2020, a 111.2% increase year-on-year (YoY).

At the same time, Asia’s booming e-commerce industry is also bringing with it new, emerging fraud risks.

In APAC, the introduction of real-time payments in particular has led to a significant increase in payment fraud, with four in five APAC banks witnessing a rise in losses, according to results from a Fico survey released in January 2020. Almost a quarter (22%) predict that fraud will rise significantly in the next 12 months.

Regulatory changes, notably those aimed at facilitating the adoption of open banking, are also expected to create additional opportunities for digital banking fraud.

Kiril Milev, who now heads Netcetera’s Singapore operations, will discuss together with Borkica Shekerova, Senior Product Manager Secure Digital Payments, how the 3DS technology, particularly, the 2.0 version, can help payment services providers, merchants and acquirers in increasing conversion rates, decreasing transaction abandonments, and improving the overall shopping experience, during a webinar on 26 August 2020.

netcetera webinar

 

Featured image credit: Technology vector created by freepik – www.freepik.com

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