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Customers expect secure, fast, and intuitive online checkout experiences. But bolstering security often requires businesses to introduce additional verification steps, which can increase customer frustration and lead to higher cart abandonment rates.
3D Secure (3DS) Data Only offers a potential solution. By using advanced data analytics for real-time risk assessment, 3DS helps provide robust security without compromising efficiency. This way, fraud prevention measures can seamlessly integrate into the shopping experience, reducing friction and helping raise customer satisfaction.
Read on as we explore how 3DS and 3DS Data Only work, and why they’re shaping the future of customer experience.
The growth of global e-commerce has brought with it a unique set of challenges, including:
One way to enhance the transaction security of credit and debit card payments is by implementing 3D Secure (3DS) protocols. “3D” refers to the three domains needed to verify a payment: the merchant domain, the card issuer domain, and the interoperability domain.
When a cardholder makes a purchase from a website that supports 3DS, they are redirected to their card issuer’s website to authenticate themselves before the transaction is approved. This authentication may involve a password associated with the card or entering a one-time code sent via SMS to the cardholder’s registered phone number.
The latest version of this solution, 3DS 2.0, offers advanced capabilities for risk analysis and data usage by passing additional data elements from the merchant to the card issuer. 3DS 2.0 allows low-risk transactions to proceed without additional authentication steps. This helps reduce friction and can help lower cart abandonment rates while maintaining chargeback protection by shifting liability from the business to the card issuer.
As businesses prepare for the future of payments fraud, 3DS can help them enjoy:
When it comes to online payment security, every country has unique regulations and customer expectations. Here’s a breakdown of how e-commerce retailers can adapt their 3DS strategies to the unique needs of Europe and the United States.
In Europe, PSD2 mandates SCA to enhance online payment security, meaning all electronic payments must undergo multi-factor authentication to minimize the risk of fraud.
Since it came into effect in 2016, PSD2 has improved customer protection through solutions like 3DS, preventing nearly €900 billion in fraud losses.4 On the flip side, shoppers have reported feeling more friction during checkout, which can lead them to abandon their carts.
Unlike Europe, the United States does not have federal regulations mandating 3DS for electronic transactions. This lack of stringent regulatory requirements offers businesses more flexibility to design a checkout process that prioritizes speed and convenience.
American customers often favor a quick and seamless transaction process, which can conflict with the introduction of security measures that can appear obstructive.
The key to successful 3DS implementation is balancing security with the shopper experience. In Europe, businesses might want to focus on communicating the security benefits of 3DS to customers, potentially integrating educational messages about the value of SCA in preventing fraud.
In the US, on the other hand, businesses can leverage 3DS as a competitive advantage, emphasizing how it helps secure transactions while maintaining the fast-paced checkout customers expect.
Businesses operating in both regions can benefit from a flexible 3DS setup that adapts to the characteristics of each market, minimizing friction and helping boost customer trust.
3DS Data Only is a specialized version of the traditional 3DS authentication framework. While standard 3DS and its successor, 3DS 2.0, often require direct interaction from the cardholder during authentication (such as entering a password or a one-time-use code), 3DS Data Only simplifies this process.
3DS Data Only uses advanced algorithms to assess transaction risk based on data exchanged between the business and the card issuer alone, including purchasing history, device ID, and behavior patterns. Authentication is handled in the background, without the need for shoppers to participate actively.
Imagine a customer who regularly shops at a specific e-commerce site makes a typical order from their usual device and location. In this case, 3DS Data Only might assess this transaction as low-risk due to the familiarity of the pattern and the consistency of the details. As a result, the transaction can be approved quickly without additional authentication steps, offering a seamless checkout experience for the shopper.
Conversely, if a new customer attempts to make a high-value purchase using an unrecognized device or from a location that has previously been associated with fraudulent activities, 3DS Data Only will likely flag this as a high-risk transaction. In this case, the system may require additional verification measures such as step-up authentication, where the customer might have to provide a one-time password or undergo other security checks to confirm their identity.
The primary advantage of 3DS Data Only is its ability to maintain strong security measures — essential for both fraud prevention and regulatory compliance — while minimizing potential disruptions during the payment process.
Below we’ll take a closer look at the key benefits of 3DS Data Only.
In Europe, shoppers have grown accustomed to the rigorous authentication processes that regulatory standards like PSD2 require, often including multiple verification steps before a transaction can be finalized. But European customers can still get frustrated when faced with a lengthier, more complex checkout process.
By implementing solutions like 3DS Data Only, which optimize and potentially bypass lengthy authentication for low-risk transactions, businesses can significantly reduce delays during checkout. This both enhances the customer experience and potentially lowers the likelihood of abandoned carts, helping unlock higher conversion rates.
3DS Data Only transmits Level 2 and Level 3 data to issuing banks. Level 2 data typically includes details like the customer’s name, billing postal code, and phone number. Level 3 data can also include additional data like the customer’s order amount, shipping address, and commodity code — information that empowers issuing banks to make more informed authorization decisions in real time.
Data Only can be more secure than traditional checkout methods, which often rely on less comprehensive datasets for authentication. The robust and detailed exchange of information reduces the risk of data breaches by ensuring that sensitive customer information is not excessively exposed during the authentication process.
3DS Data Only provides additional data points for issuer risk models and fraud protection. In other words, fraud detection algorithms can make more-informed, real-time decisions and predictions, helping minimize the risk of payments fraud.
Improvements to fraud prevention help maintain the integrity of transactions and build customer trust, which is essential in markets with high online fraud rates.
Businesses using 3DS Data Only can control and fine-tune what data they transmit to issuing banks based on specific transaction requirements and risk assessments. This flexibility is especially important for complying with global data protection regulations, such as the PCI DSS and GDPR, which mandate stringent handling and sharing of customer information.
The ability to tailor data transmission also helps businesses avoid overburdening the authentication process with unnecessary data — and this can streamline operations and reduce processing times.
Because 3DS Data Only expands the information available to issuing banks, banks are better equipped to approve purchases they might otherwise decline due to lack of information. By minimizing false declines, 3DS Data Only ensures that more legitimate transactions go through, enhancing the customer experience and retaining sales that might otherwise be lost.
3DS Data Only’s capabilities are particularly essential in today’s competitive e-commerce landscape where every transaction counts toward the bottom line.
Integrating 3DS Data Only with existing payment platforms like PayPal Checkout requires minimal technical expertise. That means businesses can quickly start using Data Only to securely accept and process transactions across a range of payment methods.
PayPal Braintree provides 3DS 2.0 security solutions to help businesses around the globe streamline customer experiences and increase revenue. Going beyond 3DS 1.0, 3DS 2.0 offers more advanced capabilities for fraud prevention and chargeback protection. 3DS 2.0 also allows businesses to pass additional data elements to issuers, giving them more information about each transaction.
Braintree’s 3DS Data Only offering helps businesses use these additional data elements to reduce false declines and improve authorization rates. As more businesses look to streamline customer experiences both in person and online, Data Only will be a valuable tool for enabling secure and low-friction payment processing at scale.
3DS Data Only is set to be a game-changer for large enterprises, helping them drive conversions and boost authorization rates while meeting data privacy regulations. As a long-time innovator in online payments, PayPal Braintree provides the tools today’s businesses need to navigate the future of authentication.
Learn more about how PayPal Braintree can help you deliver a seamless checkout experience — for online, mobile, and in-person payments — with proven and connected solutions.
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