Increasing Fraud Losses Drive Merchants to 3DS

Increasing Fraud Losses Drive Merchants to 3DS

January 27, 2022

Merchants’ use of 3-D Secure (3DS) in the third quarter of 2021 was 50 percent higher on a year-over-year basis, according to a new report. Outseer, the payments fraud company owned by cybersecurity giant RSA Security, said businesses are reacting to the explosive, pandemic-induced growth in e-commerce transactions (and the attendant increase in fraud) by implementing 3DS more often—especially in the U.S. where the authentication layer has not enjoyed as much adoption as other parts of the world where it is mandated by law.

The effectiveness of 3DS has not really been disputed. Outseer quoted external research in its report that said merchants using 3DS reported authorization rates of at least 85 percent. Merchants in the U.S. have been reluctant to implement the tool because they thought it led to too many abandoned shopping carts. Since the release of version 2.0, which uses risk-based analysis to challenge fewer transactions, U.S. companies have been more receptive to the technology.

Part of the reason more U.S. companies are turning to 3DS, according to Outseer, is that the average ticket value on confirmed fraudulent transactions in the U.S. is significantly higher than Europe, the U.K and Australia.

“As consumer buying behavior has shifted to a digital-first experience throughout this seemingly endless pandemic, newer payment models and transaction methods continue to proliferate,” said Armen Najarian, CMO and Chief Identity Officer at Outseer. “It should come as no surprise that payment transaction fraud has skyrocketed to new heights. This is particularly evident in regions where 3-D Secure 2 as the go-to payment authentication method has not been widely adopted yet.”

Download the full report here.

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