Does 3D Secure Effectively Detect and Prevent Fraud?

3D Secure adds an extra layer of authentication to a credit card transaction. Merchants use it to prevent fraud, but is it effective? What are its benefits?
By 

Daniël de Jager

 on August 31, 2022. 
Reviewed by 

Joshua Genuth

If you've ever made an online purchase with your credit card, you've likely encountered 3D Secure. Short for 3-domain structure, 3D secure adds a layer of payment fraud protection by requiring further cardholder authentication. Many online platforms only redirect certain transactions flagged as fraud to 3D Secure, since it may add some irritating friction to the checkout process (depending on the system).

Usually, a credit card transaction involves some simple communication between the merchant, payment gateway, and acquiring bank. 3D Secure adds extra steps by requiring the cardholder to authenticate directly with the issuing bank before releasing the funds.

How 3D Secure Effectively Prevents Fraud

Credit card fraud is one of the most common forms of fraud globally, increasing by over 40% from 2019 to 2020. Fraud managers are making more use of 3D Secure, especially to prevent digital goods fraud. Further authentication layers can work in tandem with machine learning fraud detection software like nSure to catch fraudsters before they do any harm.

3D Secure challenges the cardholder to either answer a specific question, perform two-factor authentication, or provide some other information to the bank that only the true cardholder could know.

Forcing all transactions to complete 3D Secure may be especially useful for fraud prevention in crypto, but without an effective platform to monitor transactions, you might be chasing away customers by making it too hard to complete a transaction. Modern 3D Secure systems reduce friction by streamlining the entire checkout process into a single authentication. When integrated properly, this technique can provide top-notch fraud security while keeping the experience as seamless as possible for the end user.

Additional Benefits of 3D Secure

Some other benefits of 3D Secure are:

  • Fewer chargebacks
  • Increased trust from customers and banks
  • Further protection for future transactions
  • Improved data sharing between banks
  • Streamlined checkout process