3DS 2.2 | All You Need to Know to Help You Stay Compliant and Boost Your Potential | CatalystPay

3DS 2.2 | All You Need to Know to Help You Stay Compliant and Boost Your Potential

  • 7 min read
  • 07 july 2023

With e-commerce businesses losing over $41 billion due to online fraud, advanced risk management and security solutions become crucial. One of the industry security standards is the 3D Secure (3DS) protocol, the newest 3DS 2.2 version of which can help merchants stay ahead of the game, avoid non-compliance fees, and reduce the risk of declined transactions and fraud. 

So let’s explore what 3DS is and why it is important, and explain what the newest 3D 2.2 update (effective as of July for MasterCard and September for Visa) means for merchants and how to get the most out of it.

What is 3DS?

No matter if it’s SecureCode for MasterCard or Verified for Visa, 3DS is one of the most advanced security standards used to reduce online payment fraud. The 3DS protocol gives an extra layer of security by having three different parties involved in processing transactions:

  • The acquirer domain 
  • The issuer domain
  • The interoperability domain 

Without going into the technicalities of the protocol, the basic principle is that the buyer proves they are also the cardholder in order to reduce card and chargeback fraud. Usually, this is achieved via an iFrame or a separate pop-up window where the buyer authenticates themselves (via a password, biometric authentication, token, an SMS code, PIN, etc.); without merchants having access to such sensitive data. Then, if all the steps from the authentication process go smoothly, the client is redirected back to the merchant’s website for payment confirmation. 

Why is 3DS important?

As the world of commerce increasingly shifts toward digital payments, the 3DS protocol has evolved to play a crucial role in mitigating fraud in real time. As we can see, having an additional layer of authentication reduces security risks for both users and merchants. This enhanced security feature helps users feel safe and confident that they are dealing with a reputable seller while it also protects merchants from chargeback fraud and other payment risks. Naturally, fewer chargebacks and disputes mean higher profits. 

Another important benefit for businesses is the fact that 3DS reduces the merchant’s liability in case of a disputed transaction, shifting it to the card issuer or acquirer. This can also reduce financial burden.

Last but not least, 3DS is essential not only for fraud mitigation but customer experience. As stated above, customers can feel safe when paying online while enjoying 100% convenience and security at the same time. Leveraging security technologies, such as facial recognition and fingerprint, adds an additional layer of convenience, which can only boost customer satisfaction and loyalty. 

What is the 3DS 2.2 update? 

3DS is not only a tech whim but an advanced means that ensures businesses are compliant with payment standards and data regulations. With 3DS being aligned with industry standards and regulations, it is evident that businesses must integrate it to stay at the forefront of innovation to build trust and boost their potential.

Here we should explain that since its launch 20 years ago, the 3DS has evolved tremendously. While 3DS 1.0 still helped merchants reduce fraud and shift liability, it offered less flexibility and support for biometrics. 3DS 2.1, on the other hand, offers more flexibility, better customer experience across different devices (including wearables and digital wallets), more intelligent risk scoring, and less abandonment. In fact, 3DS 2.1 is said to reduce card abandonment rates by 70%.

Now the newest 3DS 2.2 update aims to enhance all that and deliver even more advanced security and customer satisfaction rates. By facilitating the information exchange between parties and reducing friction, hence abandonment rates, 3DS 2.2 is becoming a huge asset to the online payment world. One of the main benefits is the fact it offers advanced SCA (Strong Customer Authentication) and 3RI (also referred to as Merchant Initiated Transactions) features. In Europe, in particular, according to the PSD2 directive designed to make online payments more secure and regulated, a strong SCA is mandatory, which is something only 3DS 2.2 supports.

How to get the most out of 3DS 2.2?

Given the benefits 3DS comes with, it is no surprise that card schemes, issuers, and acquirers are required to support the enhanced 3DS 2.2. Businesses that want to stay ahead of the curve also should understand what makes the update a game-changer and why not embracing it may lead to declines in transactions and higher fees.  Interestingly, UK banks have already started to soft-decline non-compliant transactions - with over 43,000 transactions being declined daily at the point of sale in February 2022 alone (per Barclays).

Thus, with the 3D Secure protocol being a critical tool in payment processing, fraud mitigation, compliance, and improved customer experience, businesses must integrate the newest 3DS 2.2 to stay ahead of the game. 

How? Simply at the click of a button! With our secure payment gateway, we can help you drive excellence, ensure compliance with industry standards, and protect your business and customers from fraud in today’s evolving payment processing landscape, so get in touch with us today.

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