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REPORT: UK leads on 3D Secure optimisation

REPORT: UK leads on 3D Secure optimisation
Friday January 10 2014

Analysis reveals worldwide impact of 3D Secure on transaction conversion rates and how authentication technology can be used to increase revenue

New research has found the UK is leading the way in the positive impact of the application of the 3D Secure scheme for securing online transactions.

The report, conducted by payment systems provider Adyen in conjunction with the strategy consulting firm Edgar, Dunn & Company, revealed that 3D Secure the UK was among the countries that show the highest uplift in conversion rates where 3D Secure has been implemented on all transactions.

Although in India, the uplift was almost 30%, in the UK it was around 2.5%, rising from around 2% within the last nine months, as Roelant Prins, Ayden chief commercial officer told RetailTechnology.co.uk today.

“Consumers in the UK are much more aware of 3D Secure and its merchants and acquirers have optimised their implementations,” Prins said. “This challenges some earlier, prefixed ideas and negativity around 3D Secure and that it would be a conversion killer.”

Mitigating card-not-present fraud risks 

Developed by the MasterCard and Visa card schemes, 3D Secure is an additional security layer for authenticating cardholders conducting card-not-present (CNP) transactions online. 

Traditionally, online merchants have adopted a binary view: they either implement 3D Secure across all transactions or not at all. But by analysing transactions processed on its payment platform, Adyen has detailed data about the impact of 3D Secure across its portfolio in selected countries. 

By combining authorisation rates from card issuers with merchant shopping cart abandonment rates, the research also found the authentication technology has an overwhelmingly positive impact on conversion rates in countries such as Russia, as well as India and the UK. But it was seen to have a negative impact in France, Germany and the US when implemented on all transactions. 

Brazil, China and the US also suffer the most when 3D Secure has been implemented for all transactions. In Brazil, conversion rates drop by as much as 55%, and China and the US see an average decline of 43%. 

Card issuers also have a higher likelihood of refusing transactions above a specific risk threshold because high-value transactions (around #200 0r €250) tend to be riskier. This means that conversion rates can be significantly lower among high-value transactions due to higher decline rates. 

Flexible approach increases sales

However, the report shows that when 3D Secure is implemented only on specific segments it can actually increase conversions in some markets.

Prins explained it is often difficult for merchants to assess if 3D Secure is an appropriate solution to limit fraud risks in a specific country without negatively impacting sales. As a result, close coordination with payment partners has proven to be useful to gain a better understanding of the potential positive or negative impacts of 3D Secure in specific countries, prior to implementation. 

An Adyen-developed 'Dynamic 3D Secure' feature allows merchants to use the system for specific segments of transactions, such as transactions that exceed the merchant’s pre-defined value or risk threshold. Dynamic 3D Secure can be customised to allow merchants to set specific thresholds for each country. 

“Our analysis reveals that although it does create an additional layer of friction in the purchasing process, 3D Secure is a useful tool that leads to conversion uplift in places like the UK and India,” added Prins. “The reality is that merchants should consider a segmented approach based on factual data when it comes to implementing 3D Secure.” 

Tagged as: 3D Secure | card | payments | transaction | authentication | security | fraud | risk | online | e-commerce | CNP | conversion | merchant | acquirer | card issuer | Ayden