Since its inception, the e-commerce industry has continued to grow and shows no signs of slowing down. As the e-commerce market size increases, so do the potential for incidents of web-based credit card fraud. Due to this potential, Internet-based merchants should be looking to adopt extra forms of security for their transactions. Arguably the best form of additional e-commerce security is 3D Secure.
Basically, 3D Secure is an extra layer of security for online transactions, of which there are two versions. With 3D Secure 1.0, merchants are able to authenticate the customer’s identity by prompting them to enter a one-time pin (OTP) sent via SMS or known password associated with the card at checkout. Customers enter their card information as normal but are then redirected to their card providers site. From there they must enter the OTP or known password to proceed with the transaction. 3D Secure 2.0 works in a similar way, but allows the merchant’s bank and the customer's card issuer to exchange a wide array of contextual data to authenticate the transaction, including the device that the customer uses, the time zone in which the device is located, and servers by which the site is accessed. The result is a faster and more secure checkout process as well as the elimination of the need for the customer to enter a static password for every transaction.3D secure gets its name from the three domains involved in the process: the acquiring domain (bank and merchant receiving the payment), the issuing domain (bank that issued the customer their card), and the interoperability domain (infrastructure that connects other the other two domains). 3D was first deployed by Visa in 2001 but has since been branded differently by the major credit card networks. As card-not-present (CNP) online transactions continue to grow, so too does the importance of implementing 3D Secure as a tool to authenticate these transactions.
Although not a requirement, enabling 3D secure on your e-commerce site is beneficial for a number of reasons. For starters, it helps to protect you against fraudulent chargebacks. This protection is due to the liability for these chargebacks shifting from you as the merchant to the card issuer. This liability shift can take place at different stages along the authentication process depending on a number of factors including card provider, whether or not the card is enrolled in a 3D Secure program, and the response received from an authorization request. If everything goes smoothly and the transaction is authenticated, the liability for chargebacks will shift to the card issuer since they are the ones that approved the transaction.Another benefit of 3D Secure is the financial savings associated with enrolling in the program. Currently, the interchange fee associated with CNP e-commerce transactions is around 1.6% - 1.8%. With the acquiring bank and merchant enrolled in a 3D Secure program, this fee is reduced to 1.3%. Additionally, it can help lower high-risk acquiring fees. VISA and MasterCard both charge a $5000 dollar registration fee for high-risk merchants, and any merchant doing a significant amount of transactional volume over the Internet is automatically labeled as high-risk and placed in a chargeback monitoring program. Additional fees are charged to the merchant if they go over the threshold of the acceptable number amount of chargebacks, which is currently 1% of all transactions. 3D Secure will help you keep the chargebacks for your online business under this threshold and thus saving you from having to pay unnecessary fees. Moreover, 3D secure helps to improve brand loyalty and customer confidence. With this extra layer of security in place, customers will feel more confident in making a CNP transaction on your site. Subsequently, customers will be more likely to return to your site for future purchases because they know you have gone the extra mile to protect their card data.As the globe rapidly approaches a fully digital economy, the need for additional security surrounding online card-not-present transactions is at an all-time high. 3D Secure is far and away the best additional security measure that you can implement as the owner of an e-commerce business. It can help boost the credibility of your business, reduce fees, and increase customer confidence and keep them coming back. By providing a multitude of benefits for your business as well as your customers, 3D Secure proves to be the best security tool you can adopt as an e-commerce merchant.
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