Chargeback Prevention

Understanding Frictionless 3D Secure 2.0 Technology

Understanding Frictionless 3D Secure 2.0 Technology


About 3D Secure Technology

Frictionless 3D Secure technology was introduced to the payments industry with a goal to eliminate the usage of stolen cards in the card-not-present world.  

In the earlier version, 3D Secure 1.0, consumers had to opt for the 3D secure program with their issuing bank, and a PIN was assigned to the consumer to use the card online in a secure manner.  This created two major issues for e-commerce merchants, resulting in higher card decline rates:

  1. Transactions were declined if the customer forgot the pin

  2. Customers were redirected to the card network websites (Visa, MasterCard, Amex)—from the merchant checkout page—to approve the transaction, increasing the order approval time

In a country where user interfaces and usability are key factors, 3D Secure 1.0 was not a welcomed addition, even though it was widely used and appreciated by European and Asian merchants.  3D Secure 1.0 is still in use by merchants outside the US and have seen a major decline in their fraud rate.
 

What is Frictionless 3D Secure 2.0?

Frictionless 3D Secure 2.0 allows merchants to verify a transaction with the customer’s issuing bank, without the customer having to remember the PIN or being redirected to a card networks’ page.  This creates a frictionless payment experience for cardholders.

3-D Secure 2.0 supports the transmission of rich data during transactions to the issuing bank, making risk-based decisions possible on whether to authenticate or not.  The consumer experience will also be simplified, and the need for cardholders to remember static passwords is eliminated.

A JavaScript code will be inserted into the merchant’s website checkout page, where the customer enters their credit card details.  When the customer provides their billing, shipping and credit card details, the information provided by the consumer, along with their digital footprint such as IP Address, Machine Address, etc., are sent to the cardholders issuing bank requesting to validate the transaction.  If the card gets validated, and the transaction is approved, the transaction is considered 3D Secure Verified. 

Here is how Frictionless 3D Secure 2.0 works.


Frictionless-3D-Secure-infographic-1


What is the Benefit of Using Frictionless 3D Secure 2.0?

Frictionless 3D Secure 2.0 technology can reduce true fraud chargebacks, and the challenges that come from having to control them. 

Therefore, when a customer places an order that is 3D Secure verified, they cannot call their issuing back and claim that they never authorized the transaction.

A “Not-Authorized” reason code seems to be a major concern for a majority of merchants in the card-not-present world and using 3D Secure technology can reduce this type of chargeback dispute. 

Can Frictionless 3D Secure 2.0 Eliminate All My Chargebacks?

Not-Authorized reason codes are the only chargebacks Frictionless 3D Secure 2.0 Technology can provide protection for. However if the customer files a dispute related to customer service or merchant error, those chargebacks cannot be prevented using the technology.

If you bill a cardholder on a monthly subscription, the 3D Secure technology provides protection for the 1st transaction and the 1st recurring billing transaction for trial order recurring billing merchants, and 1st transaction only for straight sale recurring billing merchants.

An issuing bank must be 3D Secure enabled to verify transactions.  If the cardholder’s issuing bank is not 3D Secure enabled, the transactions will report as non-verified.  Non-verified transactions cannot provide protection for Not-Authorized claims.

Based on our analysis, merchants can reduce up to 70% of Not-Authorized chargebacks.
 

Who Needs Frictionless 3D Secure 2.0 Technology?

Medium-risk and high-risk merchants struggling to control their chargebacks can benefit from using Frictionless 3D Secure technology.  

If you are facing a high number of Not-Authorized chargebacks, Frictionless 3D Secure can help you reduce your chargebacks organically.

Here are some of the industries that benefit most from 3D Secure 2.0 technology:

  1. Health & Beauty

  2. Insurance

  3. Electronics

  4. Gaming

  5. Digital Goods

  6. Digital Subscription

  7. Luxury Goods

  8. Digital Service

What is the Cost of Frictionless 3D Secure 2.0 Technology?

It depends on the providers and the volume of your transaction.  The higher the volume, the lower the cost per transaction.  

It can range anywhere between $0.20 - $0.50 per transaction.

If you are a recurring billing merchant, you will pay only for the initial transaction (first sale) and not for the recurring transactions.
 

How Do I Get Started & How Long Does It Take?

The integration and setup process can take between 2 – 5 business days, depending on the service provider.  

A JavaScript code will be provided to you that needs to be inserted on your checkout page to get 3D Secure 2.0 activated.  This does not require an experienced developer.  An entry level developer can usually complete your integration within 1 business day.

Is your business experiencing chargebacks?  Whether you’re a low, medium or high-risk for chargebacks, you must understand where they are coming from, what they’re really costing you, and what you can do to stop them.  Download the free Chargeback Prevention Guide for simple tips on how to prevent them.

Chargeback Prevention Tips for Low, Medium & High Risk Businesses