eCommerce Tips

How a 3DS-enabled Payment Gateway Helps Reduce Chargebacks on Your eCommerce Business

How a 3DS-enabled Payment Gateway Helps Reduce Chargebacks on Your eCommerce Business

Security is a cornerstone of any successful eCommerce operation. Among the most effective tools in the arsenal against fraud and chargebacks is 3D Secure (3DS) technology. If you've made a card payment online, it's likely you've encountered 3DS—even if you weren't aware of it. Let's delve into how 3DS works and its role in minimizing chargebacks.

Understanding 3DS in eCommerce Payments

3DS is a robust authentication protocol designed specifically for card payments. It hinges on a three-domain model encompassing the Acquirer Domain (merchant’s bank), the Issuer Domain (cardholder’s bank), and the Interoperability Domain (technology facilitating 3DS communication). This protocol is vital for both payment authentication and additional security checks, offering several ways to authenticate:

  • App-based Authentication: Integrated within a merchant's mobile app, this method prompts users for authentication during a transaction, often using biometric features like fingerprints for quick and secure verification.
  • Browser-based Authentication: Occurs on websites through a browser, where users are typically asked to enter a one-time password (OTP) sent via SMS or email, adding an extra layer of security to the transaction process.
  • 3DS Requester Initiated: Designed for recurring payments or subscriptions, this approach verifies the cardholder’s information for scheduled transactions without requiring their active participation each time, streamlining the payment process for ongoing services.

The essence of 3DS is its requirement for consumers to authenticate their transactions, significantly reducing unauthorized payments and, consequently, chargebacks.

the 3 domains in 3ds secure

2DS vs 3DS Card Payments

While 2DS offers a simplified, two-domain model for authentication, 3DS presents a more comprehensive approach, including an additional security domain. The primary difference lies in the depth of security and the consumer's interaction with the authentication process, with 3DS requiring an OTP or similar verification method.

Considerations when Choosing Between 2DS and 3DS to Reduce Chargebacks

The choice between 2DS and 3DS impacts not just security but the overall customer experience. While both aim to secure transactions, 3DS stands out for its ability to prevent various forms of fraud, including 'friendly fraud'—where chargebacks are filed without legitimate grounds. Implementing 3DS can significantly enhance your efforts to mitigate such risks.

However, the effectiveness and preference for 3DS can vary globally. For instance, while some markets like the U.S. may still lean towards 2DS for its simplicity, others, like Singapore, have widely adopted 3DS, appreciating the added security layer of OTP verification. Knowing your target market's preferences is crucial to implementing the most effective payment security strategy.

Conclusion

Familiarity with 3DS and its application in a payment gateway can greatly benefit your eCommerce business by reducing chargebacks and enhancing transaction security. For those seeking a secure, robust payment gateway solution, Tazapay offers a comprehensive suite of features designed to protect your online transactions. Accredited by the Monetary Authority of Singapore (MAS) and equipped with PCI DSS certification, Tazapay ensures your business transactions are secure and trustworthy.