10 reasons PSD2 SCA and EMV® 3DS are NOT the enemy

The deadline is here. December 31, 2020 has come and gone - so now what?

We know. You’ve heard all the scary old nightmare stories about 3DS 1.0 …. clunky to use, false declines, shopping cart abandonment, the list goes on and on.

And now … PSD2 SCA.

Well, let’s get down to the nitty-gritty about PSD2, SCA, and EMV® 3-D Secure first. (we know you’ve heard all the hype)

  • PSD2 is the European Banking Authority’s (EBA) 2nd Payment Service Directive. PSD2 is designed to drive payment innovation and data security.
  • SCA (Strong Customer Authentication) is a requirement of PSD2.
  • EMV 3-D Secure is an option that’s designed to help solve for PSD2 SCA by authenticating card-not-present transactions. It lets merchants and card issuers use what each knows about their mutual consumer to make better risk decisions.
  • The goal for PSD2 SCA is to reduce fraud and make sure all electronic payments in the EEA are being validated. It’s a mandate that’s meant to keep consumers safe – and isn’t that what we all want?'

Now that we are past the deadline, what does it mean?

January 1, 2021, PSD2’s SCA requirement was enforced in most EEA countries. So, for all digital transactions, issuers, acquirers, and merchants needed to be ready for the SCA requirements. Issuers began declining transactions and now - the potential for lost sales is here.

So now that we’ve covered the basics…here’s some fun facts.

EMV 3DS, helps solve for PSD2 SCA. But what many merchants and issuers don’t know is how much more advanced and user-friendly the updated protocol, EMV 3D-Secure, really is. Deadline aside -let’s look at the what and the why. You might just decide that EMV 3DS is just what you need – mandate or not!

10 Reasons Why PSD2 SCA and EMV 3DS are NOT the Enemy 

  1. With EMV 3DS, EMVCo has gotten rid of the cumbersome authentication requests that use to turn many users down.
    When a transaction is trusted, users just hit buy and get the payment confirmation message. When a transaction is suspicious, or the issuer doesn’t think it is legitimate, the user will authenticate the transaction – but remember, that’s not a bad thing. Really, it’s not. And often, it’s quick and seamless. Remember – you want good transactions, and your customer wants to be protected. In some cases, like a regulated market for example, EMV 3DS will require the issuer to also authenticate trusted consumers.
  2.  
  3. There’s a ton more information.
    EMV 3DS gathers up to 150 data points to evaluate a transaction – up to 10x more than the original protocol! More information = higher decision accuracy. Another win!
  4.  
  5. A big did-you-know?
    Cardinal offers a compromise for those who want to have access to the protocol but also decide when and how to use it. With Cardinal’s data only option, merchants can choose which transactions they send through and which ones they don’t. By opting out, they can still send the additional sets of transaction data to issuers to influence their decision.
  6.  
  7. Less false declines.
    By providing 10x as much transaction information to the issuers, they are better equipped to make a decision and help reduce false declines.
  8.  
  9. Less cart abandonment.
    Transaction decisioning can be done without authentication step-ups for trusted users and in most cases, faster. And remember, EMV 3DS works with mobile devices – so it works with your customers that want a seamless experience through their phones or tablets – all with a user-friendly authentication step when it is required.
  10.  
  11. More flexibility.
    Merchants who want to turn on 3DS in non-challenge mode can do so, allowing them to feed those results into their own risk models to help their own approve or decline decisions.
  12.  
  13. Helps increase approval rates = more total transactions and increased revenue.
  14.  
  15. Helps reduce fraud.
    According to Aite Group, card-not-present fraud losses are projected to total $7.9 billion in 2021, up from an estimated $7.2 billion in 2020. EMV 3DS risk-based-authentication helps reduce fraud and brings huge savings, as well as more confident consumers.
  16.  
  17. Enhanced user experience.
    One of the biggest enhancements that EMV 3DS offers is the ability to authenticate mobile and IoT devices, using biometrics. Did you know that B2B IoT payment transaction value is forecast to reach $526 billion in 2025, from $72 billion in 2018, a CAGR of 33%? ¹ That’s a lot of potential customers (and revenue) that needs protection from fraud and false declines - while at the same time providing a much more user-friendly experience. Another EMV 3DS advantage.
  18.  
  19. U.S. merchants using the solution as intended are benefiting.
    As merchant adoption rates increase, combined with optimized issuers, the numbers are coming in. Increases in approval rates and lower fraud rates when merchants send more than 25% of their transactions down the EMV 3DS rails. ²

Let’s talk. If you are interested in helping to reduce fraud, increase good orders, and lower false declines – or if you are affected by PSD2 SCA and need some guidance, we are here to help.

Remember – EMV 3DS is meant to protect the customer, help reduce fraud and false declines, and help your business and help satisfy PSD2 SCA requirements - and we can show you how.


¹ Juniper Research 2018 -2019
² Source – Analysis conducted in accordance with Visa’s Rules and operating regulations based on May’19-Apr’20 aggregated VisaNet data comparing ECI 5 & 6 vs. ECI 7 transactions for merchants sending >25% of total transactions as 3DS transactions. Assumes 3DS benefit for higher risk transactions only (VAA>20).

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