3-D Secure (or 3DS) is a security protocol designed to be an additional security layer during the processing of credit and debit card transactions.
At a high level, 3DS works by authenticating the customer’s identity before allowing a transaction to go through. This process typically involves a two-step verification procedure that requires additional information from the customer, such as a PIN or one-time password.
The primary benefit of 3DS for merchants is reduced liability of potential chargebacks. If a fraudulent transaction occurs, the card issuer may take responsibility instead of the merchant.
3DS is a great solution for identifying and protecting against risky credit card payments; it adds an extra layer of security to payments by allowing customers to authenticate their identity by providing key pieces of information.
The main downside to 3DS is when it does identify risk with a payment, it creates a lot of friction for customers processing a genuine payment. This causes a drop in conversion rate and results in revenue loss which can often be greater than fraud loss itself.
3D-Secure is known to cause customer confusion, especially for merchants with a less tech savvy customer base. And we know that the longer a customer's checkout process lasts, the higher the cart abandonment rates.
Merchants who use high friction solutions such as 3DS have to trade off conversation rate and fraud rate. If maximizing conversion is a key metric for a merchant then merchants need to be aware that 3DS will negatively impact conversion.
The other downside to 3DS is that it is focused on and therefore limited to the payment stage of the ecommerce order process. It is not an end to end fraud prevention solution. There are many types of fraud that 3DS does not solve. For example there is a rising trend around fake sign ups, bot attacks, porch pirates, friendly fraud and By Now Pay Later fraud that all sit outside of the protection of 3DS.
3DS is also only triggered on certain orders. For example orders that fall below a certain dollar amount are not processed through 3DS. Scammers and fraudsters can use this limitation to fly under the radar and continue to commit fraud.
While protocols like 3DS focus only on stemming the flow of risky payments before the order is placed, Spotrisk is a platform designed to identify and stop risk & fraud at every stage of an ecommerce transaction, all the way through to fulfillment and delivery.
A solution like Spotrisk works with a merchants existing solutions (including 3DS) to provide end to end protection.
This is how Spotrisk does it:
All orders are analyzed before, during and after payment for all types of risk. These orders are analyzed regardless of the payment type used. Fraud solutions like Spotrisk therefor have great success in identifying fraudulent orders processed through Buy Now Pay Later solutions (BMPL), instant digital bank transfers (like pOLi) and have prevented Gift Card fraud for large merchants. These all sit out of the protection of a 3DS solution.
Spotrisk also detects and stops bot traffic on a merchant's website and prevents fake sign ups and script attacks.
Spotrisk can be configured and customized for a merchant's needs and works alongside 3DS and other solutions and processes. Spotrisk can be calibrated to be very sensitive or very relaxed at specific stages of the ecommerce order process, or at different times of the busy retail calendar. Spotrisk can be customized to only create friction for orders that are high risk and high value.
Spotrisk is a great solution for merchants wanting to identify and protect against risk at all stages of an ecommerce order, from the browsing and sign up stage, all the way through to post fulfillment.
3DS is a payment protocol providing an extra layer of security for risky payments, but using 3DS alone negatively impacts conversion rates and cart abandonment. Spotrisk is an end to end risk solution that can analyze risk at every stage of the ecommerce lifecycle and together with a 3DS protocol, creates a comprehensive safety net for online retailers to eliminate fraud, save time and delight customers.
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