Hackers and criminals are becoming more and more sophisticated, using advanced tools and techniques to rip people off and target businesses. When it comes to retail crime, credit card fraud, and the like, merchants are often forced to bear the burden. The good news is that advanced security protocols and tools, like 3D Secure, can ward off fraudsters and shut down criminal transactions.
We’ll take a closer look at 3-D Secure and how merchants can use it to deal with fraud and reduce the risk of getting hit with chargebacks. If you need assistance fighting fraud, feel free to reach out to the ChargebackHelp team at your earliest convenience. We’ve helped countless merchants reduce chargebacks and ward off fraudsters.
With 3-D Secure, It’s All in the Name
3-D Secure stands for “three domains,” with the three domains referring to the issuer, the merchant, and the 3-D Secure infrastructure itself. This infrastructure enables fast and secure communication between relevant parties, including the cardholder and the merchant.
When a cardholder uses a card, the 3-D Secure system will analyze the transaction and evaluate risks (looking for, say, someone using a stolen credit card.) If the system determines that further verification is needed, the 3-D Secure infrastructure will set up a secure communication channel between the website and/or Point-of-Sale and the issuer.
Then, the cardholder will be prompted to enter a pin number or One-Time-Password (OTP) texted to their phone. This system is used primarily for online shopping. However, it can be set up at brick-and-mortar locations as well. With security an increasing priority, 3-D Secure may become more widely adopted in the future and is projected to enjoy a CAGR of over 12% through the near future.
The 3-D Secure system was developed by Visa but later licensed to Mastercard. In practice, most card networks now support it, making the whole system relatively easy to implement while also providing breadth of scope. This makes it especially useful for merchants.
The Benefits of Two-Factor Authentication
Crucially, 3-D Secure can be used as a form of “two-factor” authentication (2FA). Having the card alone isn’t necessarily enough when 3-D Secure is in place. A fraudster who stole someone’s credit or debit card may also need to have the victim’s phone.
In practice, it’s relatively easy to steal a physical credit card, but it’s harder to gain access to both a card and a phone. Keep in mind, phones are often locked down themselves, requiring passwords or biometric data to gain access.
3-D Secure isn’t the only 2FA system but it is one of the easiest to set up and most effective. Merchants should look at other areas to implement 2FA as well. For example, an online merchant could require 2FA for users to log into an account to make purchases. Ultimately, by adding extra hoops to jump through, merchants can make life difficult for criminals.
Of course, merchants don’t want to make things too difficult or they run the risk of losing customers. 3-D Secure is pretty simple to use in practice, assuming that the individual has access to their phone.
Using 3-D Secure to Fight Fraud and Chargebacks
If you’d like to use 3-D Secure, you’ll have to integrate it into your payment gateway. The exact process varies from gateway to gateway, but in practice, the system is pretty easy to set up. Since 3-D Secure is so common these days, many gateways make integration rather straightforward. Of course, if you need assistance, you can reach out to your payment gateway or you can contact the ChargebackHelp team for advice.
The Benefits and Drawbacks of 3-D Secure
In many European countries, Strong Customer Authentication (SCA) is a must. This authentication requirement stipulates that for online transactions above 50 euro, the merchant must get two of three authentications: knowledge, possession, or inherence authentications. 3-D Secure makes it easy to meet these requirements.
Ultimately, 3-D Secure can reduce chargebacks and fraud. These days, chargebacks are an especially grave threat because they can incur hefty fees and other penalties. It’s crucial to fight chargebacks, and 3-D Secure offers one effective way to do so.
That said, there are some drawbacks. When you set up the 3-D Secure system, it adds a bit of friction and makes the checkout process a tad longer. This could result in some lost sales. Further, if a customer doesn’t have access to their phone, they may not be able to complete the transaction.
Still, 3-D Secure is a great option for many merchants. That said, there are many other steps merchants should take to fight fraud and reduce chargebacks. Need assistance? Reach out to the ChargebackHelp team.