3D-Secure (or 3DS) is a recognized safeguard for merchants and buyers against fraudulent use of credit cards by adding a second layer of security when completing the payment process. The goal is to securely authentify the credit card holder.
After typing his credit card details on the payment page, your customer is redirected to the bank website and is required to confirm that he is the bearer of the card via an authentication method: code sent by text message or requirement to enter the birthdate are the most widely used methods.
What are the advantages of 3D-Secure?
The 3D-Secure is an efficient tool to prevent fraud attempts on credit card transactions. Once it is activated, the fraudster faces a real barrier to make a purchase because he usually doesn't have any way to get the 3D-Secure code or card holder's birthdate.
It is proven that the 3D-Secure reduces the chargeback rate caused by fraud.
What are the drawbacks of 3D-Secure?
Even if 3D-Secure is an efficient protection against fraud, it is not a full warranty against the chargeback risk.
More specifically, chargebacks can occur, even if the payment was processed with 3DS in the following situations :
- payments made with Visa prepaid cards;
- payments made with non-French Visa/Mastercard business cards;
- payments for which the merchant (instead of the customer) enters credit card data on the payment page;
- commercial disputes related to the service or product provided (item quality, delivery, etc.).
This list is not exhaustive and can change in the future.
A frequent blame against 3D-Secure is its negative impact on the shopping cart conversion rate.
An important fact to know is that 3D-Secure is entirely managed by the bank issuing the card.
The occurence of an additional stage in the payment process and the lack of usability of authentication systems offered by banks, more specifically on mobile devices, are dragging down the conversion rate by 15 % at the time of completing the payment.
An efficient solution to achieve the right balance between risk and conversion rate on the payment page is to activate the Smart 3D-Secure feature provided by PayPlug (more information)