Article
Using 3D Secure to increase conversion while reducing fraud
3D Secure makes payments safer, helps you meet compliance requirements, and improves the checkout experience.
Payment authentication has a reputation problem: too many redirects, too few authorised payments. 3D Secure 2 changes that, raising the bar on authentication while keeping the payment experience smooth for your customers.
While 3D Secure is a requirement in countries covered by PSD2, its value extends beyond compliance. Any business, anywhere, can use it to guard against fraud, improve the customer experience, and avoid the costs that come with fraudulent chargebacks.
In this article, you’ll learn:
What is 3D Secure?
Benefits of 3D Secure 2
How does 3D Secure work?
3D Secure examples
3D Secure with Adyen
A quick reminder of what 3D Secure is
3D Secure (Three-Domain Secure) is an authentication protocol that adds an extra layer of security to online card transactions, including those made with a 3D Secure prepaid card. It works by verifying that the customer making the purchase is the actual cardholder, protecting businesses from card-not-present fraud.
The "three domains" in 3D Secure:
The acquirer domain: The merchant and their payment processor or acquiring bank.
The issuer domain: The cardholder's bank that issued the credit or debit card.
The interoperability domain: The technology provided by card schemes (like Visa or Mastercard) that supports secure communication between the acquirer and issuer.
When these three domains work together, they verify identity details instantly during checkout. 3D Secure's also a key compliance tool. For instance, it's the primary way to meet strong customer authentication (SCA) requirements mandated under PSD2. By using this framework, businesses can safely accept card-not-present transactions while lowering the risk of unauthorised credit card use and subsequent payment fraud.
Why use 3D Secure?
The benefits of 3D Secure include:
Lower fraud rates
Higher card authorisation rates
Fewer lost sales compared to older authentication methods
The first version of 3D Secure was slow and forced customers onto external banking pages. 3D Secure 2 (3DS2) fixes these issues. 3DS2 is built for mobile-first commerce and runs authentication in the background to keep the checkout experience smooth.
Benefits of 3DS2:
Frictionless native authentication: Customers verify payments directly in your app or website without external redirects, which means fewer abandoned carts.
Smarter risk decisions: Over 150 data points, including device details and transaction history, are shared between merchants and banks, leading to highly accurate, instant risk assessments.
Faster verification: Customers can verify themselves using face scans, fingerprints, or SMS codes instead of remembering complex passwords.
Delegated authentication: Merchants can handle strong customer authentication directly inside their checkout via a 3D Secure API or by using delegated authentication, maintaining full control over the user experience.
With these features, 3D Secure 2 helps you protect your revenue from chargeback fraud while improving overall payment performance.
How does 3D Secure work?
3D Secure works by checking transaction data in the background and only prompting the cardholder to actively verify themselves if a transaction seems high-risk. This selective process ensures that legitimate, low-risk transactions are completed instantly, while suspicious actions are flagged for review.
The protocol routes each payment through one of two authentication paths:
The frictionless flow: The merchant and card issuer exchange data points behind the scenes. If the data looks normal, the issuer authenticates the transaction instantly without asking the customer to do anything.
The challenge flow: If the bank needs more proof, it triggers a quick verification step. The customer completes this step using biometrics (like a fingerprint) or a one-time SMS code.
The transaction is completed only after the identity is confirmed. This keeps fraud low even if a shopper's card details are compromised.
Understanding the liability shift for chargebacks
Implementing 3D Secure also protects your business financially through a "liability shift." Normally, merchants are responsible for the costs of fraudulent card transactions. When a payment is authenticated using a 3D Secure challenge, the financial responsibility for fraudulent chargebacks shifts from your business to the card-issuing bank. This safeguards your bottom line against card abuse and friendly fraud.
Examples of 3D Secure
3D Secure examples show how different businesses use intelligent authentication to secure checkouts, comply with local regulations, and protect their margins. Companies worldwide rely on these tools to secure their digital checkout flows while expanding their global operations.
Here are real-world examples of how major enterprises use these technologies:
HUGO BOSS: Delivering a seamless omnichannel experience
HUGO BOSS worked with Adyen and Visa to unify its global shopping experience across 450+ stores. To address the challenge of balancing seamless retail with robust security, they implemented shelf-side checkout in stores and leveraged EMV 3D Secure and Visa Network Tokens online. This combination has helped them fight fraud while enabling a smooth, frictionless authentication process. By integrating these solutions, HUGO BOSS achieved higher authorisation rates, fewer declines, and a more personalised, digital-first shopping journey for their global customers.
RMS: Streamlining hospitality with embedded payments
RMS, a cloud-native PMS platform, replaced fragmented gateways with a single payment infrastructure powered by Adyen. This integration helps their properties automate reconciliation, saving roughly 60 minutes daily, and significantly reduces disputes by 93%. By utilising embedded solutions, RMS properties realise approximately £200k in annual savings, allowing them to focus on delivering superior guest experiences.
Bolt: Optimising security and authorisation with 3D Secure
Bolt, a leading mobility super-app, implemented EMV 3DS and network tokenisation to enhance its global payment strategy. By sharing transaction data with issuers, Bolt has successfully improved its transaction approval rates, achieving a 90.14% approval rate and a €38.6 million revenue uplift in a year. This innovation allows Bolt to maintain a frictionless checkout experience while ensuring compliance with strong customer authentication (SCA) requirements.
How customers can verify themselves
Adyen helps you make the most of 3D Secure by using an automated, machine-learning-driven 3D Secure payment gateway engine that finds the perfect balance between payment security and checkout speed. Our platform assesses risk in real time for every transaction to decide the fastest, safest payment path.
How we support your business:
Smart authentication decisions: Our technology decides whether a transaction is safe enough for a frictionless flow or requires a challenge, maximising authorisation rates.
Automated compliance: We automatically track and update compliance rules, keeping your business aligned with global mandates like PSD2 and the upcoming PSD3 framework.
Flexible checkout integrations: Easily embed our mobile and web SDKs directly into your checkout to maintain a consistent, secure customer experience across all channels.
With Adyen, you can focus on scaling your business while our technology protects your revenue, manages compliance, and prevents chargeback fraud.
If you're ready to optimise your transaction success rates and protect your revenue from chargebacks, get in touch today.
FAQ
3D Secure (Three-Domain Secure) is an online card payment authentication protocol that acts as an additional security layer to verify cardholder identity. It works by establishing a secure communication link between the merchant's financial institution, the card network, and the cardholder's bank during checkout.