user
Blog

3DS Authentication for Issuers: Implementation Guide

This implementation guide is designed to help issuers integrate 3DS authentication into their environments, leveraging insights from Decta’s expertise in secure payment solutions and issuer processing.

April 29, 2025
3DS Authentication for Issuers: Implementation Guide

As the digital payment landscape evolves, ensuring secure transactions is paramount for issuing banks and card issuers. 3D Secure (3DS) authentication has become a critical tool in combating fraud while enhancing customer trust.

What is 3DS Authentication?

3D Secure is a security protocol for online card transactions. It verifies that the individual using their payment card online is a legitimate cardholder, requiring authentication via password, one-time code, or biometric authentication. For issuers, the benefit of 3DS authentication is that it reduces fraud, and for transactions that successfully authenticate through 3DS, the liability shift occurs to the merchant, provided specific requirements are met. For the issuer, this is advantageous because it decreases chargebacks.

3DS 2.0 is the latest version, and it enhances the customer experience with risk-based authentication, meaning low-risk transactions don't require additional verification steps. This is important because lengthy payment processes increase the likelihood of cart abandonment.

Why Issuers Should Implement 3DS

  • Fraud Reduction: 3DS decreases the chances of unauthorized transactions as it authenticates the cardholder identity and ensures that only legitimate customers are purchasing.
  • Liability Shift: Once a transaction is approved via 3DS, if it's fraud, the liability shifts to the merchant (or acquirer), meaning that issuers can minimize their financial exposure.
  • Regulatory Compliance: Many regions and card schemes require 3DS or strongly encourage it to remain compliant with security standards; for example, PSD2 in the European Union requires Strong Customer Authentication (SCA). Implementing 3DS allows issuers to remain in compliance and avoid penalties as well as gain access to specific markets.
  • Customer Trust: Secure payment options provided to cardholders allow them to trust the issuer more and become more loyal as they feel their transactions will be safe.
  • Better Authorization Rates: The enhanced data sharing between merchants and issuers related to 3DS 2.0 allows issuers to make better risk assessments which increases authorization rates for legitimate transactions and reduces false declines.
  • Modern Use Cases: 3DS 2.0 allows for authentication in mobile apps, in-app purchases and other features like IoT devices, meaning that as digital payment trends advance, issuers can accommodate new use cases.

DECTA places a strong emphasis on secure payment solutions, and for any issuer using DECTA's issuer processing services, 3DS would be a recommended solution for fraud prevention.

What Are the Common Challenges Faced by Issuers When Implementing 3DS

  • Liability Shift: While 3DS shifts liability to merchants, issuers face risk when merchants implement 3DS selectively on high-risk transactions. Merchants who employ 3DS merely to prevent chargebacks will be clear to issuers, who are then at risk for higher fraud losses.
  • Low Approval Rates: In regions where 3DS adoption is inconsistent, this could lead to lower authorization rates. If implementation varies among issuers, merchants may not process 3DS transactions consistently. Some issuers will deny transactions automatically based on concerns of legacy integration and insufficient processing.
  • Operational Complexity: Issuers will need system updates, and staff training, and have to ensure their card schemes are part of the integration. This places significant demands on resources and requires a potentially substantial initial investment.
  • Customer Friction: While 3DS 2.0 reduces friction, failed authentication steps can result in lost transactions. The problem affects the issuer's reputation because while the transaction occurs on the merchant's site, the issuer is responsible for cardholder welfare and may face negative perceptions when purchases fail due to issues with 3DS.
  • Regional Variations: Different markets have varying regulatory requirements; PSD2 SCA compliance is mandatory in some regions but optional in others. The complexity increases for issuers operating globally. Card scheme rules can differ regionally as well.
  • Technical Integration: Many issuers operate on legacy systems that require significant modification for new processes; integration into existing issuer processing platforms may require substantial development effort. Effective payment provider partner support like Decta will be needed to ensure seamless deployment.

Step-by-Step Implementation Guide for Issuers

A smooth and effective 3D Secure (3DS) implementation begins with careful planning and execution across several key steps:

1. Assess Your Current Infrastructure

You first need to check if your issuer processing systems can support 3D Secure (3DS) implementation. Assess whether your platform has all the necessary 3DS protocols or if upgrades are needed. For example, DECTA's issuer processing solutions can help here; they're already equipped for easy transition to 3DS, ensuring optimal platform operation.

Also, make sure your card management system supports 3DS 2.0. You'll need to confirm you can perform the appropriate data exchanges with card schemes (Visa, Mastercard) to facilitate authentication requests.

Additionally, assess your systems' ability to store and process authentication data.

2. Choose the Right 3DS Version

There isn't a question of whether to implement 3DS, but rather which version is right for you. 3DS 1.0 still runs many legacy processes, but the consensus favours 3DS 2.0 for better user experience and support for mobile transactions and app-based transactions. For example, 3DS 2.0 reduces cart abandonment rates by allowing frictionless authentication for low-risk transactions.

The payment scheme providers have specific requirements for 3DS 2.0 implementation, so consult with them to determine necessary industry standards.

DECTA's 3D Secure solutions use up-to-date features for compliance.

3. Partner with a Reliable 3DS Provider

A technological partner is invaluable for successful implementation. If your company is an issuer, DECTA can provide comprehensive services for 3D Secure, from integration support to customer service for compliance adjustments.

Regardless of which 3DS Provider you choose, ensure they support both 3DS versions for compatibility during implementation and that their solution integrates seamlessly with your issuer processing platform.

4. Implement Risk-Based Authentication

Establish risk parameters based on transaction value, location, and cardholder behaviour to create appropriate risk profiles.

When possible, use machine learning algorithms to adjust risk-scoring models and improve the system's ability to identify false positives accurately.

Ensure that low-risk transactions proceed with minimal friction to provide a smooth customer experience.

5. Educate Cardholders

Much of 3DS implementation success relies on cardholder awareness. Many customers may be confused by authentication flows, potentially leading to abandonment.

Inform customers about 3DS benefits through segmented communications so they know what to expect.

Include information about authentication methods—SMS codes, app-based approvals, or biometric verification.

Provide easily accessible support for customers encountering authentication issues.

6. Test and Monitor Performance

Before going live, thoroughly test your configuration. Run tests across various scenarios.

Test both high-risk transactions and low-risk transaction authentication flows to understand how each operates.

After implementation, authentication success rates, transaction abandonment rates, and fraud incidence will be measured to evaluate performance.

With DECTA's issuer processing solutions, you can monitor these metrics along with other analytics tools to assess 3DS performance and make adjustments.

7. Ensure Compliance and Updates

3DS guidelines and card scheme rules evolve over time. Stay informed about new protocols. For example, PSD2 Strong Customer Authentication requirements in Europe mandate 3DS use for many online transactions.

Regularly check compliance requirements specific to your region and card schemes to avoid processing issues.

Partner with your 3DS provider to keep your security practices updated with all relevant patches and to maintain regional regulations compliance.

Implementing 3DS authentication is a strategic move for issuing banks and card issuers aiming to secure online transactions while maintaining a positive customer experience. By following this assessing infrastructure, choosing the right version, partnering with experts like DECTA, and focusing on cardholder education-issuers can effectively roll out 3DS solutions. Continuous monitoring and adaptation to evolving standards will ensure long-term success in fraud prevention and regulatory compliance.

With DECTA's tailored 3D Secure and issuer processing solutions, issuers have access to the tools and expertise needed to navigate this critical implementation.