What is EMV 3D Secure?
EMV 3D Secure is the latest security protocol set up by the major card brands that authenticates consumers when making card not present e-commerce purchases. The authentication used by EMV 3D Secure is ‘frictionless’, meaning that it happens behind the scenes and does not affect conversion rate or cart abandonment. You may have seen Visa’s “Verified by Visa” or MasterCard’s “SecureCode” logos on checkout pages before. Both of these are based on the 3D Secure protocol.
The latest 3DS protocol, “EMV 3DS”, was designed with 3 goals in mind: reducing fraud, increasing approval rates, and enhancing the consumer experience. EMV 3DS passes transaction information in the background between all stake-holders: the card holder’s bank, the merchant’s bank and the merchant. By sending this additional information about the transaction, EMV 3DS authenticates the transaction.
Why Does It Matter?
With the rise of e-commerce a new form of fraud, “friendly fraud” has come about. Friendly fraud occurs when a consumer files a chargeback instead of first trying to call the merchant for a refund. For the consumer, disputing the charge with the bank is often easier than trying to work things out with the merchant. For the merchant, once the chargeback is filed, the merchant is fined a fee and now must submit evidence and supporting information about the chargeback to avoid not only paying the penalty but losing the proceeds from the transaction as well. In many cases, the consumer is trying to ‘cyber-shoplift’ – to receive the money-back from the transaction and keep the products or services that were purchased.
When EMV 3DS is implemented, the merchant is armed against friendly fraud. The banks now ‘know’ that the cardholder was in possession of the card when the transaction took place. When Johnny Consumer calls his bank to file a chargeback, claiming that he didn’t place the transaction, he cannot. For merchants, especially merchants in ‘high-risk’ verticals, EMV 3DS is a game-changer.
Will it Impact My Conversions?
In short, no. EMV 3D Secure collects and measures up to 150 parameters behind the scenes. Meaning, there is no difference whatsoever for the user experience when you implement EMV 3DS on your checkout page. If you want to capture as many transactions as possible using EMV 3DS, you run unauthenticated users through an additional process to collect information (usually by sending a code to their mobile phone). However, you’ll see the best return on your investment in 3DS by running all your authentications in the background and allowing unauthenticated transactions to pass through.
How Can I Implement It?
When implemented, 3D Secure authenticates roughly 70% of transactions. With the friction-less method employed by EMV 3DS, transactions that are not authenticated go through as they normally would have. Implementation is fairly simple and can be completed in a day or so. Using an EMV 3DS provider, like PAAY for example, PAAY will setup the account for you and actually implement the JavaScript code on your checkout page. If you’re the do-it-yourselfer type, integrating EMV 3DS to your checkout page is as easy as adding the .js code and adding 3 additional parameters to your checkout form.
Visa and MasterCard are slowly, but surely, tightening their restrictions on cardholder disputes. This means higher costs and higher risk for merchants. Those merchants that arm themselves with tools like EMV 3DS will see lower cost, more opportunity and lower risk for their growing enterprises.
Continue to Part 2 in our series on EMV 3D Secure, “EMV 3D Secure and PSD2 Compliance“.
Want to learn more about EMV 3DS? Schedule an EMV 3DS demo with PAAY today to learn how EMV 3DS can help you combat friendly-fraud.