The digital payment world has shifted dramatically over the years, and as a result, the need for security and seamlessness is non-negotiable. And just like how Superman always saves the day, 3DS 2.0 came in as a saviour in terms of payment authentication. But what is this 3DS 2.0? 3DS 2.0 is a way to verify that online card payments are safe and reduce fraud.
But what if we tell you it wasn’t always like this? 3DS 2.0 was initially 3DS, and it was chaotic to say the least; it was buggy and had a lot of friction that made payments sound like a hassle. In this article, we’re taking you on a field trip to examine the evolution of 3DS 1.0 to 3DS 2.0.
The Early Days: 3D Secure 1.0 and Its Limitations
3-D Secure (3DS) is a payment authentication method meant to add extra protection, helping to deter fraud. It lets consumers verify their identity with their card’s issuing bank when they buy things digitally. The “3D” represents the three players involved: the acquiring bank, the issuing bank, and the system supporting the protocol (like the internet or software).
Arcot Systems and VISA created the protocol to make online payments safer and curb fraud. Merchants started using the first version of 3DS in 1999 to prevent fraudulent online purchases and boost the security of digital payments.
This initial version, along with 3DS 1.0 (or 3DS1), helped reduce fraud, but also created several issues for e-commerce. One problem was that it made card users sign up for the system using static passwords, which many people then forgot. When someone made a purchase, 3DS checked 15 basic data points to verify who they were. And, since 3DS placed the responsibility for fraudulent purchases on the card issuers, they often played it safe, creating a system that often had roadblocks.
The Shift: Why an Upgrade Was Necessary
But the question that stands is, why was an upgrade necessary? Well, there are a couple of reasons for that, including:
Mobile Growth
The usage of mobile-based shopping platforms and payment apps started increasing, overcoming roadblocks that were present with 3DS 1.0, which was impossible to navigate in a mobile setting, where often, when you close an app, it shuts down, especially with low RAM.
Rise in Fraud cases
But mobile use wasn’t the only thing that increased. With the increase in Mobile usage, the growth of fraud cases also increased. People weren’t aware of fraud, and the roadblocks of 3DS 1.0 made people more susceptible to fraud.
Need for Better UX
Also, most mobile users weren’t very tech savvy; they were just regular people looking to make payments. The transaction process of 3DS 1.0 was confusing, and payments became a headache for mobile users. A better UX and UI were needed more than ever.
Regulatory Pressure
To make matters worse, countries like the EU were enforcing stricter regulations on user verification, like PSD2, which made it mandatory for merchants to have SCA (Strong Customer Authentication).
3D Secure 2.0: A Smarter and Smoother Payment Authentication Experience
In 2016, 3DS 2.0 was created to address the shortcomings of prior payment authentication versions. This updated iteration was entirely re-engineered to enhance security and create a smooth user experience for authorised customers. 3DS 2.0 signifies a major upgrade as it:
- Handles mobile phones and similar consumer devices seamlessly.
- During the purchase, information initially goes to the bank for potential extra verification.
- Challenges occur only for high-risk transactions; otherwise, a “frictionless flow” starts.
This lets merchants easily add authentication to their checkout flows. Banks that issue cards can approve payments using risk-based methods, so customers don’t need to do anything extra.
Real-World Benefits of 3DS 2.0
The moment 3DS 2.0 for payment authentication came into the picture, it was like a saviour for most financial institutions; it quickly got adopted due to the numerous benefits it came with. The real-world benefits of 3DS 2.0 are:
Higher approval rates
Since genuine transactions increased rapidly, and it was adopted by major payment institutions, it quickly helped them receive higher approval rates as payments were seamless and quick.
Reduced fraud
With extra security and fewer frictions, payments became quick, and fraud was reduced, with the help of a smarter and layered security, making payments far safer than during the era of 3DS 1.0.
Better customer experience
Since the user experience became simpler, users spent less time with payments, and as a result, cart abandonment, which was a growing pain of most e-commerce platforms, became non-existent.
Greater merchant trust
Due to the fact that merchant trust improved drastically, they were able to stay compliant with most global standards. Ensuring that they could operate in peace.
Conclusion
With digital payments being the present and not a distant future, 3DS 2.0 has emerged as a saviour that provides a seamless experience to users while offering additional security. With higher approval rates, reduced fraud, and a greater merchant trust, we have come quite far from the bottlenecks of 3DS 1.0.
