Table of Contents
In today’s world where businesses operate without boundaries, customer trust has become crucial to revenue.
International consumers may be worried about fraud and cybersecurity. On the other hand, businesses (like you) might find verifying customer identity challenging. After all, you need to ensure that you are providing a safe and fraud-free payment experience to your customers.
This is where 3 Domain Secure 2.0 (3DS 2.0) comes into the picture.
With 3DS 2.0, you can ensure the most effective authentication and payment processing experience for your Indian and international customers. 3DS 2.0 offers a lightning-fast checkout option with a higher success rate by:
- Enabling frictionless transactions
- Mitigating fraud transactions
- Shifting the liability of chargebacks from businesses to the customer’s bank, especially for chargebacks arising from fraudulent transactions.
Pro Tip: Cashfree Payments is now live with 3DS framework to enable Indian merchants accept international payments while protecting their business from fraud and chargebacks.
What is 3DS 2.0?
3DS 2.0 is the latest cardholder authentication layer introduced by Visa and Mastercard. It replaces 3DS 1.0, which was introduced in 2001 by Visa. In the last 21 years, 3DS 1 has been the default method for payments and payers to be verified when they are using credit or debit cards to pay for transactions.
With the availability of better data points to authenticate cardholders, there had to be an upgrade in the way businesses authenticate cardholders. While card payments in India require an OTP-based 2-factor authentication, 3DS 2.0 replaces that in some instances with an AI-based risk assessment. It introduces frictionless authentication to improve the purchase experience enabling repeat customers to pay without entering an OTP.
What’s In It for Your Business?
3DS 2.0, in addition to making customers’ information more secure, makes the payment flow smoother, faster, and more convenient.
Enables Frictionless Customer Authentication
3D 2.0 allows businesses and payment providers to share additional data points on each transaction with the cardholder’s bank. This includes payment-specific data, such as the transaction value, device ID, merchant details, address, type of customer (repeat/new), behaviour of the cardholder, customers IP, and previous transaction history.
With 3D Secure 2 the cardholder’s bank uses this information to assess the risk score of the transaction and then select an appropriate response accordingly:
- Frictionless Flow
By examining the data, the bank will verify if the real cardholder is making the purchase, in which case the transaction goes through frictionless flow. The authentication is completed without any additional input from the cardholder. (basically skipping the 2FA flow)
- Challenge Flow
The card network calculates a risk score based on the data sent by the merchant. This risk score is passed by network to the issuing bank. Now, the issuing bank will have a certain risk threshold protocol in place.
On that basis, it will decide if the transaction will be processed through the frictionless flow or the challenge flow. The challenge flow will only come into play if the bank determines a fraudulent transaction. In this case, it will need further proof to allow the transaction.
In that case, the transaction is sent through the challenge authentication flow. The customer is asked to provide additional information to authenticate the payment. (going via 2FA flow)
As you can imagine, there are certain benefits attached to the frictionless flow. For instance, it leads to:
- Enhanced customer experience
- Reduced cart abandonment rate
- Higher success rate
- Complaint with the latest regulatory requirements
- Significantly lower chargebacks for merchants
A Smoother User Experience Awaits with 3D Secure 2.0
3DS 2.0 is designed to make it easier for banks to offer an innovative authentication experience on their mobile banking apps. Instead of entering a password or receiving a text message, the cardholder can authenticate a payment through the banking app just by using their fingerprint or via facial recognition.
3D Secure 2.0 ensures that increased security does not translate into poor user experience. Moreover, most payments can be completed with the frictionless flow.
If You’re an Indian Merchants Accepting Cross-border Payments?
At Cashfree Payments, we have migrated to the 3D Secure 2 framework to enable your business with the highest level of safety. Indian merchants using cross-border payments for international transactions can protect their business from fraud and chargebacks with Cashfree Payments.
3DS 2.0 framework is in line with the new regulatory requirements and compliance that will enable your business to grow in international geographies effortlessly. 3D secure 2.0 will be automatically applied if the customer’s bank supports it, or it will by default fall back to 3D secure 1.0 to complete the transactions if 3D secure 2.0 isn’t live for the cardholder’s account yet.
Get in touch with us to learn more about how you can move to 3D Secure 2 the easy way!
