What Online Merchants Need to Know about 3-D Secure 2.0

Ian Poole, Sales Engineering Director, CardinalCommerce

Thursday, February 16, 2017, 1:45 p.m.

What you can expect to learn from this session

Things Merchants Need to Consider

• Adaptability to changing marketplace

• Need to do homework on providers

• What you should be considering now

What is 3-D Secure?

• Authenticates digital transactions in real-time

• Holds private session between the cardholder

and issuer

History of 3-D Secure

• Launched in the early 2000s

• Authenticates cardholders with their issuing bank

• Traditional implementation challenged every transaction

• Results = checkout friction and cart abandonment

Known as Verified by Visa, Mastercard SecureCode,

American Express SafeKey, Discover ProtectBuy, and

other brands

History of 3-D Secure, PART 2

Fast forward to today …

• Moving to risk-based authentication

• Rules-based approach

- Gives merchants control

- Friction-free consumer experience

- 1.0.2 was built for PCs only

Specs for 3-D Secure 2.0 were released in October, 2016

Risk-Based Authentication – Issuer Roles

• Risk-based approach – issuers know a lot about their cardholders

• Use the additional data points for 2.0 to assess risk and to authenticate

• Minimal consumer checkout friction

Rules-Based Authentication – Merchant Roles

• Provide additional data fields, shared with the issuer, to make a better

risk-based decision

• Use rules to decide which transactions to authenticate based on

issuer’s approach

• Delivers better consumer

experience across all devices

Merchant Benefits of 3-D Secure

• Liability shift on fraudulent transactions

• Lower acquiring costs

• Increased authorization rates

• 3-D Secure 1.0 has been used for more than a decade

– Authentication methods

– Built for PCs

– Friction in the consumer experience

• EMVCo released specifications for 2.0 in October, 2016

– Flexible

– Data-driven approach

– More merchant data to allow better decisioning

– Device agnostic

– Non-payments transaction authentication

3-D Secure 2.0

• Issuers are making a risk assessment and authentication decision

• Merchants will have control over friction-less and challenge flows

• Merchants can run 3DS 2.0 on all devices and shopping channels

2.0 is a Data-Driven Solution – Here’s Why

• Passing data earlier gives merchants the ability to decide whether to

authenticate a transaction

• 1.0.2 and 2.0 will co-exist – need to have a solution that supports

both

• Data benefits both issuers and merchants – creates a symbiotic

relationship

2.0 is a Data-Driven Solution – Here’s Why Continued

What do Merchants Need to Do?

• The Majority of the Activity to Become 3DS 2.0-Ready is on the Issuer/Vendor Side

• What to Look for in a Vendor

–Support of both 1.0.2 and 2.0 versions of 3DS

–Experienced with rules management

–Provide an easy integration to collect additional data fields

–Performance and analytics – visibility into transaction results

What Does this Mean to Me?

• Specs need to be made into products

– Networks need to customize

– Vendors need to build

– Issuers need to integrate

• This is the starting line, not the finish line

• Lots of work needs to be done

Here are some things you may be thinking

• What’s the timeline for 2.0 to be market-ready?

• Should I wait until 2.0 is fully baked?

• What is the bottom line impact?

– Liability Shift

– Authorization Lift

– Can use 2.0 with more traffic - superior consumer experience

What can you do now to prepare? • If you are not running 3DS at all, start there

• Start passing additional data fields to your provider

• Look at where you are (and aren’t) running 3DS today

• There are things you can do today that will impact your bottom line

• Not just “online” orders for 3DS

Cardinal – Trusted Industry Advisor

• Involved since early 2000s

• Developed Cardinal Consumer Authentication to make 3DS more merchant-friendly

• Global footprint – in 198 countries and territories

• Business and Technical Associate of EMVCo

Key Takeaways

Things Merchants Need to Consider

• Adaptability to changing marketplace

• Need to do homework on providers

• What you should be considering now

Questions?

Disclaimer

This presentation contains general information only. The MAG and its guest speakers are not, by

means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Neither the MAG nor its guest speakers shall be responsible for any loss sustained by any person who relies on this presentation.