The report, conducted in conjunction with the strategy consulting firm Edgar, Dunn & Company, finds that 3D Secure has an overwhelmingly positive impact on conversion rates in countries such as India, Russia and the United Kingdom, but has a negative impact in France, Germany and the United States when implemented on all transactions. However, the report shows that when 3D Secure is implemented only on specific segments it can actually increase conversions in these markets.
Developed by the MasterCard and Visa card schemes, 3D Secure is an additional security layer for authenticating cardholders online. Traditionally, online merchants have adopted a binary view: they either implement 3D Secure across all transactions or not at all. By analyzing transactions processed on its payment platform, Adyen has detailed data about the impact of 3D Secure across its portfolio in selected countries. By combining authorization rates from card issuers with merchant shopping cart abandonment rates, Adyen reveals that:
- India, Czech Republic, Russia and the United Kingdom show the highest uplift in conversion rates where 3D Secure has been implemented on all transactions. In India, the uplift is almost 30 percent, and in the United Kingdom it is around 2.5 percent.
- Brazil, China and the United States suffer the most when 3D Secure has been implemented for all transactions. In Brazil, conversion rates drop by as much as 55 percent, and China and the United States see an average decline of 43 percent.
- Card issuers have a higher likelihood of refusing transactions above a specific risk threshold because high value transactions tend to be riskier. This means that conversion rates can be significantly lower among high-value transactions due to higher decline rates.
For merchants it is often difficult to assess if 3D Secure is an appropriate solution to limit fraud risks in a specific country without negatively impacting sales. As a result, close coordination with payment partners has proven to be useful to gain a better understanding of the potential positive or negative impacts of 3D Secure in specific countries, prior to implementation. An Adyen-developed Dynamic 3D Secure feature allows merchants to use 3D Secure for specific segments of transactions, such as transactions that exceed the merchant’s pre-defined value or risk threshold. Dynamic 3D Secure can be fully customized to allow merchants to set specific thresholds for each country.
“There is a general feeling that 3D Secure detracts from the consumer experience and that it can have a negative impact on conversion rates. In fact, our analysis reveals that although it does create an additional layer of friction in the purchasing process, 3D Secure is a useful tool that leads to conversion uplift in places like the UK and India,” explained Roelant Prins, CCO, Adyen. “The reality is that merchants should consider a segmented approach based on factual data when it comes to implementing 3D Secure. Adyen’s Dynamic 3D Secure feature allows merchants to take a more flexible approach to payments, leveraging factual data to mitigate fraud risks and increase sales.”