Is EMV 3DS Really Going to Reduce False Declines?

How to take advantage of the new protocol (a.k.a. 3DS 2.0) using next-gen technologies

We have the EMV chip technology to thank for the steady drop in card-present fraud. Bad actors are just not willing to put in the work to duplicate chips for fraud. However, as we all know, they didn’t stay put for long and are mastering card-not-present (CNP) fraud. Nilson Research projects that losses due to such fraud will reach $31 billion by 2020.

It’s not only fraud that is making companies lose revenue. In the U.S. alone, false declines for payment card transactions totaled $303 billion in 2017, according to Aite Group. Global retail sales through mobile grew a whopping 47% year-over-year from 2015 to 2016.

Considering these numbers, the EMV® 3-D Secure protocol (EMV 3DS) couldn’t come at a better time. EMV 3DS (commonly known as 3DS 2.0) processes CNP payments without the onerous authentication barriers it had in the past and it’s set to help issuers make better authentication decisions, reducing costly false declines. The new protocol is spearheading the verification process by gathering more intelligence around each transaction and giving merchants the choice to share that additional information with the issuer, to help financial institutions make more accurate decisions and increase approvals.

Authenticate Before Checkout

EMV 3DS is set to reduce fraud, but there is still work to be done in the authentication space. Intelligent, multi-layered security solutions need to be instituted upstream at the start of an online interaction so anomalous behavior can be detected, tracked, and stopped well before getting to the checkout.

Right from the login, customers can be seamlessly identified by their online behavior and not by static data like credentials, passwords or security questions. This allows companies to spot fraudulent behavior right from the beginning of the interaction. Intelligent multi-layered solutions that include passive biometrics and behavioral analytics can transparently verify the customer throughout the process and also compare it to the user’s previous behavior across all channels to decide if it’s the legitimate user or not. This methodology catches the vast majority of the fraudulent interactions before they get to the checkout.

These new cutting-edge technologies can also discern between script-based and human-based attacks, stopping both well before the transaction is processed. A large number of false positives or customers not identified correctly and declined could result in a severe hit to the bottom line of a company. At the same time, increasing the steps and complexity to verify customers to complete a transaction usually leads to cart abandonment. Risk managers play a key role in creating customized rules based on their own traffic to ensure evolving fraud is spotted in real time and, in turn, false declines and false positives are reduced to a minimum.

With passive biometrics technologies, companies repel unwanted automated activities as well as harden their security right at the new account opening, login, and account maintenance functions. This multi-placement security reduces the volume of transactions that require manual review, slashing the company’s operational costs.

Beefing Up Transaction Security

Seamless security for customers as well as multi-layer fraud solutions are paving the path to prosperity. Today, we see companies with beefed up security and fraud protections well before the transaction is processed. As technologies evolve and improve, there is going to be an increasing focus on good customer recognition to offer a better, easier user experience. Known customers will be automatically recognized and offered special incentives or rewards. This will allow online businesses to create and maintain customer relationships as well as having the ability to solidify their brand in the marketplace.