With online commerce booming, Asian banks and payment services providers have shown a clear interest in adopting 3-D Secure 2.0 or 3DS2.
This is an improved version of the 3DS authentication protocol for card payments that comes with increased security and which allows for a more frictionless commerce experience.
Nitin Palande, the Head of Sales and Partnerships for Asia Pacific (APAC) at Netcetera, a Swiss software company, sat down with Fintech News Singapore to explore this trend further.
“The new standard ensures strong security, seamless operation, and a high conversion rate for online businesses, benefits which stakeholders in Asia’s payment industry and merchants should be taken advantage of”, Palande said.
According to Digital Commerce 360, Asia accounted for 59.1% of global online retail sales in 2020 and the digital economy is expected to add US$1 trillion to Asia’s GDP in the next ten years.
In Southeast Asia, some 125,000 new internet users are being added every day, representing a new market for online businesses and e-commerce platforms. It’s estimated that 40% of internet spending in China and 30% in Indonesia represent new consumption rather than substitutes for in-person purchases,
Streamlining the check out experience for e-commerce
With digital commerce becoming an integral part of Asian consumers’ daily life, it has become critical for online merchants to take a closer look at important metrics such as their shopping cart abandonment rate, and focus on optimising the checkout flow.
Shopping cart abandonment is when a potential customer starts a check out process for an online order but ends up leaving the site without completing the order. Shopping cart abandonment causes e-commerce brands to lose an estimated US$18 billion in yearly sales revenue, according to a Forrester research.
A high shopping cart abandonment can signal poor user experience or a broken sales funnel, and reducing that rate leads directly to more sales and revenue. With the new version of 3DS, online transactions are safer and smoother, increasing thus both customer experience and revenue for merchant.
Nitin Palande
“Earlier versions of the [3DS] protocol caused increased customer friction due to static passwords and the number of cardholders that abandoned their transactions was high,”
Palande said.
“Frictionless flow is one of the main advantages of 3DS2. It empowers customers to authenticate themselves without being challenged, through a process called risk-based authentication.”
Leveraging risk-based authentication to reduce friction
Risk-based authentication uses real-time intelligence to gain a more holistic view of the context behind each login and/or transaction. It evaluates the risks associated with a transaction and involves customer for verification only if the risk is deemed not low enough. This means a much more frictionless e-commerce experience can be created through more accurate risk detection.
“By implementing 3DS2, improved support is provided for online web and in-app purchases and will only interact with cardholders on suspicious transactions,” Palande said. “Card abandonment will go down … facilitated by reduced payment transaction time, absence of explicit redirect, and mitigation of the password-related risks.”
The 3DS authentication protocol was introduced back in 1999, four years before the first iPhone was released. Needless to say that since then, a lot of technological advances have occurred, rendering the protocol somewhat obsolete and unsuitable with the technologies that are commonplace today.
3DS2 aims to offer a solution that not only works with the technologies that shoppers use today but also anticipates the possible ways shoppers will authenticate themselves in the future.
“3DS2 goes far beyond desktop-oriented 3DS1. It adds support for in-app authentication and ensures challenge screens compatibility with mobile devices … 3DS2 turned down static passwords, replacing them with one-time passcodes and biometrics. The latter means that customers can verify themselves using fingerprint, face or voice recognition if their devices permit.”
Palande said.
It is already being rolled out and will soon be mandatory in the European Union (EU). By the end of 2021, all banks within the bloc will have to comply with the new standard for online payments within the Eurozone.
“3DS2 is a requirement of PSD2 (the EU Revised Directive on Payment Services) Strong Customer Authentication (SCA). It means that if compliant with its requirements, a business will most likely be able to expand globally without drastic compliance hassles,” Palande said.
Both Mastercard and Visa will discontinue support for 3DS1 in October 2022.
Featured image credit: Edited from Pexels
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Source: https://fintechnews.sg/51065/e-commerce/why-a-shift-to-this-new-security-standard-is-crucial-for-asias-e-commerce/
