26/10/2021

What is 3DS2? Complete guide

By Mariana Almeida Marques

3D Secure 2.0 is one of the key components of the revised payment services directive (PSD2). This protocol holds enormous value for all businesses operating in the European Economic Area, as it enables them to easily comply with the newest payment regulations, whilst delivering their customers a seamless and frictionless payment experience. In this article, we will explore all about 3DS2, including its history and benefits.

What is 3DS2?

3D Secure 2.0, or 3DS2, is an authentication protocol used for all card-not-present online transactions. It is an updated version of the original 3DS1, and offers a more seamless user experience with frictionless authentication processes. 3DS2 was developed in 2016 by EMVCo, a global technical body that facilitates payments worldwide.

EMVCo stands for Europay, MasterCard and Visa, though its members now include other card networks such as American Express, Discover and JCB. 3DS2 entered the market as a new, more modern solution to comply with Strong Customer Authentication rules like KYC. As the deadline for compliance with SCA has been extended to 2022, the adoption of 3DS2 has been slow.

What is the purpose of 3DS2?

The main purpose of 3DS2 is to prevent fraudulent transactions and enhance security in online payments. The PSD2 regulations established by the European Union put emphasis on Strong Customer Authentication (SCA) practices across all industries. SCA includes verifying the legitimacy of your customers ahead of a transaction through two or more elements. The main elements are: knowledge (something they know), possession (something they have) and inherence (something they are- such as fingerprints). Though the implementation of 3DS2 itself isn’t mandatory for merchants, 3DS2 is agreed to be the easiest and most effective solution to comply with SCA.

You don’t need a specific SEPA bank account to make SEPA payments. Your traditional bank account should already cover SEPA bank transfers if it is located within the Eurozone area. If you are based in a non-Eurozone country, you can double check which banks or financial institutions offer SEPA before opening an account with that bank or making a payment. In order to make a SEPA transfer, the transaction needs to be in Euro currency, otherwise you will have to use your national payment system.

3ds2 helps merchants protect their customers.

Differences between the 3DS2 and 3DS1

Though equally effective in protecting customers online, the original 3D Secure (or 3DS1) came with considerable issues. It was initially introduced by Visa in the early 2000s, and there have been major advancements in technology since then. This caused 3DS1 to lack in speed, to be incompatible with mobile browsers and, generally, to add friction to the payment process. So, in order to provide customers with a better user experience, card networks developed the 3DS2.

The 3DS2 allows customers to complete the authentication process within their checkout page, rather than being redirected to new pages whilst purchasing an item. This naturally eases the flow of the payment process and makes it much easier and faster to pay. 3DS2 also allows for companies to authenticate their customers even without them making a purchase.

This means that companies can, for instance, verify the legitimacy of their customers when they add bank details to mobile wallets. The upgraded version of 3DS1 also has a strong focus on mobile, since mobile payments are becoming one of the most popular payment methods across the globe. Merchants can integrate 3DS2 into their mobile apps and authenticate customers when they buy products using their mobile phones.

Benefits of 3DS2 for your business

Because 3DS2 was developed taking into account today’s customers needs, it offers a much more user-friendly payment experience. Providing a user-friendly, seamless and fast checkout experience to customers makes them much less likely to abandon the checkout page and to end up not purchasing the item or service. Therefore, 3DS2 contributes to a decrease in checkout abandonment rates and avoids loss of profit.

3DS2 works through multi-factor authentication.

3DS2 also functions on the basis of multi-factor authentication, meaning that customers need to provide more data than simply their bank details or name. The more details customers provide, the easier the authentication process is. When authenticating customers, there is always a chance that payments are declined due to minor typos or errors. Whilst is it better to be safe than sorry, it is equally important to avoid the rejection of payments that aren’t actually fraudulent. Because 3DS2 extracts a wide variety of data from customers, it facilitates the verification of legitimate transactions and reduces false declines.

How Imburse can help

Imburse is a cloud-based middleware connecting large enterprises to the payments ecosystem, regardless of their existing IT infrastructure. Through a single connection to Imburse, enterprises can collect or pay out using a variety of payment technologies and providers around the globe.

In a world where consumers payment preferences and technologies are ever-evolving, Imburse works with insurers to future-proof their payment requirements. Regardless of the business area, market, or requirements, Imburse will connect you to your choice of technology and provider.

Reach out to our team below should you want to discuss how Imburse can help you. Our team is happy to show you what our platform can do for your business and offer you a free demo.

 

Author

Mariana Marques

Mariana is a content writer at Imburse, specialising in Finance and Technology topics.

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