What is 3D Secure Authentication?

How Does 3D Secure Authentication Work?

1. Transaction Initiation: When a customer chooses to purchase an item or service online and proceeds to checkout, they enter their payment details—usually a credit or debit card number.
2. Authentication Request: After the payment details are entered, the transaction request is sent to the payment processor (such as PhotonPay). This triggers the 3D Secure process. The card network (Visa, Mastercard, etc.) sends an authentication request to the bank or card issuer.
3. Verification: The customer is then prompted to verify their identity. Depending on the card issuer, this step can involve several methods of verification, such as:
   1. A one-time password (OTP) sent to the customer’s registered phone number or email.
   2. Biometric authentication, like fingerprint scanning or facial recognition.
   3. Answering a security question or entering a personal PIN.
4. Transaction Completion: If the customer successfully authenticates their identity, the payment proceeds as normal. If the authentication fails (e.g., incorrect OTP or authentication issues), the transaction is canceled.

Why is 3D Secure Important for Payment Security?

1. Reduced Risk of Fraud The primary advantage of 3D Secure is its ability to significantly reduce fraud risk. It requires customer confirmation, which prevents fraudsters from using stolen card details for transactions. Even if a hacker acquires a cardholder’s information, they would need additional proof of identity to complete a transaction.
2. Protection for Merchants and Consumers 3D Secure is beneficial for both merchants and consumers because it protects sensitive financial information. Merchants are less likely to experience chargebacks related to fraudulent transactions, and consumers can confidently make purchases without worrying about unauthorized payments.
3. Regulatory Compliance In regions like the European Union, 3D Secure is essential for compliance with the Strong Customer Authentication (SCA) requirements under PSD2 (Revised Payment Services Directive). This regulation mandates two-factor authentication for online transactions, ensuring that consumers' identities are thoroughly verified. With 3D Secure, merchants can comply with these regulations easily while enhancing security.

The Benefits of 3D Secure

• Reduced Fraud Risk: 3D Secure allows for the transfer of chargeback liability to the issuing bank in cases of fraud. If a transaction is disputed, merchants are less likely to bear the financial cost.
• Higher Conversion Rates: By protecting transactions and boosting consumer trust, 3D Secure often leads to higher completion rates for online purchases, as customers feel more secure using their payment methods.
• Compliant with Regulations: Adopting 3D Secure makes it easier for merchants to meet regulatory requirements such as PSD2 and SCA, avoiding potential fines and penalties.

Conclusion