The European payment market is under pressure striving to accommodate all the new PSD2 3DS2 regulations. The introduction of 3DS2 has induced new directives on banking, security and other payment aspects. Each business has to concede and navigate these adjustments according to the regulations if they covet to proceed to function without parentheses.
On the bright side, the European Commission ensured to define the specific deadlines and present evidence of what and how will occur when the new regulations come into effect. Therefore, merchants comprehend exactly what impact it will have on them and their customers.
The first PSD2 3D Secure protocol known as 3DS1 was established by Visa in 1999. It helped to create a two-way authentication for desktop browsers, though it needed to evolve to match changing customer demand and eliminate fraudulent transactions. Thus, American Express, Discover, JCB, Mastercard, UnionPay and Visa - the EMVCo - developed 3DS2.
3DS2 is Visa and Mastercard friendly and also 3DS2 has Stripe usage opportunities.
The invention of 3DS was aimed at creating a secure protocol that safeguards and defends online payment transactions. With the aid of 3DS consumers were able to make purchases online without succumbing to a great risk of fraud.
What is 3DS2 can be easily guessed - the 2 at the end insinuates that it is an updated version of 3D Secure PSD2. The PSD2 3DS2 is the second 3D Secure authentication protocol aimed at online card payments which provide a sleeker user experience. However, its use mostly persists within Europe and the European Economic Area (EEA) with several exceptions like India or South Africa.
3DS3 demands sellers to convey supplementary data with every transaction to guarantee that the customer is a legitimate cardholder and not an imposter.
Global payments with 3DS2 can bypass PSD2 regulations in countries outside the EU or EEA. However, if a customer who purchased a good or service makes a direct transaction from the EU or EEA then the merchant is obliged to follow the regulations of PSD2 3DS2 and SCA.
According to PSD2 3DS2 specifications, the 3DS2 deadline for EU and EEA was on 31 December 2020. From that date payment providers are legally required to enforce SCA for Card not Present transactions. Failure to comply with PSD2 regulations may be subject to oppressive fines or forfeiture of the license.
3DS2 deadline for the UK merchants who operate strictly within the UK is swiftly approaching - 14 September 2021. Even though they have an extended deadline they are still required to fully suffice the SCA requirements.
When it comes to 3DS1 vs 3DS2, the obvious winner is 3DS2. 3D Secure 1.0 (3DS1) only supported Visa and MasterCard on Desktop browsers. The 3D Secure 2.0 (3DS2) expanded to all major card networks and can be used via mobile. 3DS2 MasterCard, Visa and Stripe can be integrated with many modern technologies and advanced authentication methods.
The biggest 3DS2 challenge is for merchants to provide data to issuers for high-quality data analysis. When it is achieved, the effect will be seen on higher authorized transaction rates and convenient payment options for consumers.
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