The demand for secure yet seamless online payments has never been higher. With cybercrime and online fraud resulting in over $4 billion in losses and counting, businesses face growing pressure to protect both their customers and their bottom line.
Enter 3D Secure (3DS), a widely adopted security protocol that plays a vital role in safeguarding card-not-present (CNP) transactions. Originally introduced by major card networks like Visa with Visa Secure and Mastercard with Mastercard 3DS Secure Interface, 3DS helps authenticate users before a transaction is completed, making it significantly harder for fraudsters to exploit stolen card information.
Whether you're managing an e-commerce platform, building a FinTech application, or simply trying to optimize payment flows without compromising user trust, understanding how 3DS works and its evolution is essential. From fraud prevention and compliance with global regulations to enhancing the user experience with 3DS2, this protocol is far more than just a security checkbox; it's a strategic advantage.
What is 3DS?
3DS (Three-Domain Secure) is a security protocol used in online payments to help protect against fraud and verify that the person making the purchase is the actual cardholder. The three in Three-Domain Secure refers to the three parties involved:
- Issuer domain: the card issuer (the bank or financial institution that issued the card).
- Acquirer domain: the bank or processor receiving the payment.
- Interoperability domain: the infrastructure provided by the card network (e.g., Visa, Mastercard).
You may have encountered 3DS when prompted to enter a code sent via SMS or approve a transaction with your face or fingerprint in your banking app during checkout.
Why 3DS matters
In the fight against card-not-present (CNP) fraud, 3D Secure (3DS) is a powerful tool. It provides authentication before authorization, reducing the chances of fraudulent charges and shifting liability away from merchants in many cases.
Additionally, through the evolution of the 3DS, industry adoption and technical advancements have enabled stronger data exchange between players, offering a smoother and more user-friendly authentication process that helps minimize risk.
- Chargeback protection: By implementing 3DS, you shift liability for fraudulent transactions to the issuer bank, reducing your exposure to chargebacks and operational losses.
- Reduced fraud: Card-not-present (CNP) fraud is one of the biggest threats in digital commerce. 3DS introduces an authentication step before authorization, making it much harder for fraudsters to complete a transaction using stolen card credentials.
- Regulatory compliance (e.g., PSD2 and SCA in Europe): If your platform operates in or serves the EU or UK, Strong Customer Authentication (SCA) under PSD2 mandates 2-factor authentication for many online payments. 3DS2 is the most widely adopted mechanism to achieve SCA compliance.
- Protection of sensitive account information: 3DS ensures that customer account details are securely managed and protected during online transactions.
- Increased consumer confidence: When implemented correctly, 3DS2 actually boosts consumer confidence rather than causing friction. It reassures users that their personal and financial data is protected because you are using modern, secure practices.
Comparison to other security measures
When it comes to protecting online transactions, 3DS stands out from other security measures thanks to its dynamic approach. Unlike static passwords, which can be easily compromised or forgotten, 3DS leverages different types of active authentication, such as direct-to-device one-time passcodes. This additional layer of security makes it much harder for fraudsters to gain unauthorized access, even if they have obtained card details.
Compared to other authentication methods, 3DS offers a more comprehensive solution by combining strong customer authentication with risk-based authentication. This means that the system can adapt to the risk level of each transaction, providing a tailored security response that strikes a balance between protection and convenience. Furthermore, 3DS is widely supported by major card brands, such as Visa and Mastercard, making it a trusted standard for both merchants and consumers.
By leveraging advanced authentication and security features, 3DS helps reduces fraud and ensures that only legitimate transactions are approved, giving both businesses and customers greater peace of mind.
How 3DS impacts the customer journey
While 3DS adds security, it also introduces an extra step in the checkout flow. Verifying a customer's identity before proceeding can add time to the checkout experience and may be perceived as disruptive or cumbersome by some. However, with the 3DS's improved user experience and mobile optimization, that friction is significantly reduced.
3DS and global compliance
3DS is required or recommended in many regions to reinforce trust and reputation for reliability.
How 3DS works (Step-by-Step)
- Customer initiates checkout with card details.
- 3DS checks if authentication is needed.
- The customer is redirected to their bank with card details.
- The issuing bank will authenticate or decline the transaction.
- Upon success, the purchase is verified and completed securely through the 3DS protocol.
Types of 3DS
With two types of 3DS that represent advancements in authentication technology, the best choice depends on what your business needs.
Frictionless
Provides Liability Shift
Standard 3DS 2.0 meets regulatory requirements and prioritizes strong customer authentication and liability shift, the authentication flow comes with possibility of a customer challenge if it is deemed a risky transaction.
3DS Data Only prioritizes a seamless customer experience by relying on rich data exchange to assess risk with no customer challenge, but merchants retain fraud liability.
The best choice depends on a business's specific needs, risk tolerance, and the regulatory environment in which it operates.
Who is 3DS best for
3DS is essential for many businesses, including:
- Businesses that bring their own fraud provider or orchestrator
- Merchants building fraud decisioning internally
VGS 3DS
VGS 3DS is designed to deliver stronger security, smoother checkout experiences, and greater flexibility for businesses and their customers.
With VGS 3DS solution, businesses no longer need to compromise between security and flexibility. You'll gain:
- A vendor-agnostic routing experience
- Easily integrate with your current tech stack
- Reduce risk and latency
- Own and control your 3DS strategy
- A dedicated support team
Final thoughts
3D Secure is a critical layer, and in mandated regions, it is a necessary component in payment risk management strategy. As digital payments grow, implementing 3DS ensures your business is not only compliant but also competitive and trusted by users.
Get started with 3DSGetting started with 3D Secure protection is designed to be simple.
With VGS, you shift services away from processors and own and control your 3DS strategy.
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