Card-not-present fraud is still a big threat for merchants as it accounts for 60 to 70% of the total card fraud. Merchants have to efficiently protect their activity from fraud but also need to offer a streamlined user experience with less friction and less steps to follow, in order to increase their conversion rates.
The challenge for merchants is to find the right balance between fraud detection and user experience optimization.
What is 3-D Secure?
3-D Secure is an authentication method that protects merchants in case of fraudulent use of a payment card on their website.
This is how it works on a merchant website:
3-D Secure provides a strong authentication of the cardholder, in order to protect your activity from fraudulent attempts, and also to secure your customers’ payment data. With 3-D Secure you add a layer of authentication to minimize the risks of chargeback.
What is liability shift in the context of 3-D Secure?
When the 3-D Secure is activated on the merchant’s payment page, he is not anymore liable for the authentication of the cardholder as there is a liability shift towards the cardholder’s issuing bank. Indeed, the 3-D Secure redirects the cardholder to an authentication page of his issuing bank. It is then the issuing bank who is responsible for the authentication of the cardholder.
When there is a dispute, the merchant cannot be taken as responsible of the wrong authentication.
When does the 3-D Secure works?
For one shot payments, merchants can benefit from the 3-D Secure authentication. When a merchant asks for the first payment to be done by card, 3-D Secure can be activated. The next payments done by card or SDD won’t be controlled with 3-D Secure.
This means that for recurring payments, it is not possible to authenticate the cardholder with 3-D Secure.