In the U.S., a common belief is that 3DS negatively impacts conversions. The assumption is that introducing friction through customer challenges reduces the likelihood of completing a purchase, while relying on frictionless 3DS may lead to lower authorization rates from issuers.
However, data from Forter suggests that more should be considered when analyzing 3DS performance in the U.S. market. In fact, if implemented strategically, 3DS can increase conversions while shifting liability away from merchants. This can be particularly powerful for merchants struggling with high instances of first-party or friendly fraud or looking to improve fraud approval rates.
3DS as a Revenue Driver
The key to transforming 3DS into a revenue driver without hurting authorization rates or introducing unnecessary customer friction is continuously monitoring and adjusting your 3DS strategy based on issuer preferences and transaction risk.
Each issuer has a different risk appetite when it comes to authentication data. As shown in this recent Stripe report, over-reliance on frictionless authentication can lead to poor authorization rates with issuers who are hesitant to accept 3DS. Likewise, sending a 3DS data-only packet to an issuer not equipped to use the data in their decision-making process is a wasted cost, as 3DS rails incur fees with every use.
By considering both issuer preferences for 3DS and the risk level of each transaction, you can make smarter decisions about when to use 3DS, frictionless 3DS, data-only flows, or when to bypass 3DS entirely.
Results
Forter’s AI-driven approach constantly tests and learns to understand how issuers respond to 3DS, enabling us to recommend the best approach.
Forter’s model gradually shifts chargeback liability while ensuring frictionless authentication and stable authorization rates — effectively reducing chargeback rates without impacting customer experience. Additionally, shifting liability can be an efficient manner to combat first-party fraud.
In this example, Forter was able to apply frictionless authentication on ~50% of all transactions.
While increasing the percentage of frictionless transactions, Forter closely monitored authorization rate performance on the 3DS vs. non-3DS population to ensure that 3DS is not harming overall conversion rates. As shown in the graph below, for this example, the Authorization Rate for 3DS transactions actually becomes higher than the Authorization Rate for non-3DS transactions.
This highlights the importance of understanding your issuers. By factoring in issuer preferences when shaping your 3DS strategy, frictionless 3DS doesn’t have to be a challenge; it can drive revenue for your business.
