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A 3D Secure chargeback occurs when a transaction is disputed despite passing through 3D Secure authentication. 3D Secure is still a valuable asset in reducing unauthorised card use.
Let’s look at what 3DS does and how it benefits you, the merchant.
There’s a lot to see here.
But does it prevent chargebacks? Well, in part.
I’ll explain.
What is 3D Secure?
3D Secure (3DS) verifies a cardholder’s identity whenever a credit card is used to make a purchase. It adds another layer of protection to the existing anti-fraud mechanisms in global use.
3DS is used in Verified by Visa, Mastercard Identity Check, American Express SafeKey, Discover ProtectBuy, JCB J/Secure, and more.
More than just a specification. It’s a comprehensive set of protocols and procedures that protect cardholders and merchants.
How does 3D Secure work?
3D Secure adds an extra step to the payment process to confirm a customer’s identity before the transaction is approved. When a cardholder makes a purchase, 3DS kicks in and runs a quick check—this could be a one-time password, biometric scan, or app approval, depending on the setup.
The goal? Make sure the person using the card is really the cardholder.
If the authentication passes, the transaction goes through and liability for fraud may shift away from you. If it fails or looks suspicious, it’s either declined or flagged.
Getting Started with 3D Secure Authentication
Setting up 3D Secure is easier than you might think. Most major payment gateways and processors offer built-in 3DS support - you just need to enable it. Work with your payment provider to activate 3DS and make sure your checkout flow is compatible with the latest version (3DS 2.x is the current standard).
Once it’s live, transactions will automatically go through the 3DS check when needed. No heavy lifting is required on your end - just some backend setup and testing to make sure everything runs smoothly.
It's a small step that adds serious fraud protection - and boosts your chargeback defenses right out of the gate.
What is 3D Secure 2.0?
3D Secure 2.0 (or just 3DS2) is the upgraded version of the original 3D Secure protocol. It was designed to fix the clunky user experience of 3DS 1.0 and better support today’s multi-device, mobile-first shopping habits.
3DS2 delivers smoother, faster authentication with less friction. It allows for biometric verification, in-app authentication, and risk-based checks that happen behind the scenes—often without the customer even noticing.
In short: it’s smarter, faster, and more flexible. And if you're still on 3DS 1.0, it's time to upgrade. Most major card networks have phased out support for older versions, and 3DS2 is now the standard for secure, user-friendly online payments.
Why Does a 3D Secure Authentication Error Happen?
Authentication errors can pop up for a few reasons. Maybe the cardholder entered the wrong password or didn’t complete the verification step. Sometimes it’s a technical glitch - like a timeout, poor internet connection, or an issue with the issuing bank’s server.
It can also happen if the cardholder isn’t enrolled in 3D Secure, or if their bank doesn’t support it. In some cases, the error might be on the merchant’s end - such as outdated 3DS integration or incorrect setup.
Bottom line: errors usually boil down to user input, tech hiccups, or enrollment issues. Monitoring these helps you stay ahead of abandoned transactions.
Does 3D Secure Prevent Chargebacks?
Yes and no. 3D Secure helps reduce chargebacks caused by fraudulent transactions by verifying the cardholder’s identity at checkout. When 3DS authentication is successful, liability for fraud-related disputes often shifts from the merchant to the card issuer - a major benefit.
However, 3DS doesn’t stop all chargebacks. Disputes related to delivery issues, service quality, billing errors, or customer dissatisfaction still go through. These aren’t considered fraud, so 3DS won’t block them.
Why Doesn’t 3D Secure Prevent All Chargebacks?
3D Secure does a good job of preventing transactions with a response code indicating fraud. The transaction will not be blocked if a response code is misidentified or doesn’t indicate fraud.
For instance, service or product quality, delivery issues, or processing errors are not considered fraud. 3DS won’t process them. Therefore, it can’t prevent those chargebacks. It allows those transactions through.
Your chargeback mitigation process must have multiple layers of protection. This can reduce your level of fraud and your number of chargebacks to almost zero. ChargebackStop, our service, provides this multi-layered approach.
Related: How to Fight Chargebacks in 4 Basic Steps.
Here are 12 specific reasons for this multi-layered approach:
- Non-Fraud-Related Disputes: Chargebacks are often initiated for reasons other than fraud.
- Service-Related Issues: Customers may be dissatisfied with the service, delivery delays, or failure to receive the product.
- Processing Errors: Mistakes such as duplicate charges, incorrect amounts, or technical errors.
- Merchant Errors: Incorrect product descriptions, billing errors, or failure to adhere to return policies.
- Technical Limitations: 3DS can sometimes fail to authenticate a legitimate transaction, leading to declined transactions.
- Customer Misunderstanding: A customer may not recognise a transaction and, therefore, dispute it, regardless of the security measures in place.
- Insufficient Customer Education: Customers unfamiliar with the 3DS process might mistakenly view it as a security risk and dispute transactions.
- Partial Implementation: Not all merchants implement 3DS, leaving some transactions unprotected.
- Cardholder Opt-Out: Some cardholders might choose not to use 3DS or may not be enrolled, leading to unauthenticated transactions.
- Incompatibility with Some Payment Methods: 3DS is primarily designed for card transactions and may not apply to other payment methods.
- International Transaction Issues: Cross-border transactions can sometimes face challenges with 3DS authentication, potentially leading to disputes.
- False Declines: Legitimate transactions might be falsely declined due to stringent security checks. These false positives are a known problem, especially with earlier versions.
3D Secure Benefits
The benefits of the 3DS system are numerous. Here is a list of some of the most important.
- Enhanced fraud prevention: Fraudulent transactions are much more difficult to perpetrate.
- Compliance with regulations: Use complies with the EU’s PSD2-mandated requirements and other globally acknowledged policies.
- Reduced chargebacks: Transactions marked “fraud” are largely prevented.
- Frictionless transactions: In most cases, the latest version of 3DS allows for seamless customer experiences.
- Mobile compatibility: Older versions did not have mobile device support.
- Improved approval rates: Legitimate transactions are less likely to be declined.
- Risk-based authentication: Applies more stringent authentication for higher-risk transactions.
- Biometric authentication support: Includes fingerprints and facial recognition.
- Real-time decision-making: Rapid assessment and authentication of transactions.
- User-friendly experience: The UX is much improved compared to previous versions.
- Better customer data protection: Improved safeguards for sensitive information.
- Lower operational costs: Less expensive to install, implement, and use. Lower fraud and chargeback costs.
- Scalability: Supports businesses of all sizes.
- Customisable security protocols: Tailor the level of security based on transaction risk.
- Data insights: Provides reports that can improve security and anti-chargeback strategies.
- Multiple card network support: Works with many major networks.
- Authentication flexibility: Choose different methods for user verification.
Now, on to the big question.
Important Take-Aways
3DS is not a total solution to preventing chargebacks. It’s essential to understand its limitations. To reduce chargebacks to near zero, you need a layered protection approach.
Merchants who use 3D Secure must balance transaction security with user experience (UX). Having smooth, quick, and error-free online purchasing ensures happy customers. Otherwise, you end up with cart abandonment or customer dissatisfaction issues. The chargeback service you use can save time and money while improving UX.
Educate customers in the way your purchasing mechanism works. Remember that many, if not most, 3DS verifications happen without direct customer involvement.
Ensure they understand that 3DS protects them from fraud and the process is worth any slight delay they may encounter.
3DS can be integrated with your other fraud protection tools. Use this integration to gather valuable data for user experience, fraud prevention strategies, and chargeback elimination.
Continuously update all your tools, including 3DS, to meet the challenges of the online shopping environment.
Looking Forward
This topic has many moving parts. You may have questions you’d like answered.
Visit ChargebackStop to reach our excellent customer service staff. We’re happy to help you understand how to prevent fraud and chargebacks.
You can also sign up for a free demo to see how all this works in real life.
Visit ChargebackStop.com today.
FAQ: Does 3D Secure Prevent Chargebacks?
What is 3D Secure?
3D Secure is an additional security layer for online credit and debit card transactions. It aims to reduce fraud by authenticating the cardholder's identity at the time of purchase.
Does 3D Secure completely prevent chargebacks?
No, 3D Secure does not entirely prevent chargebacks. It significantly reduces fraud-related chargebacks but doesn't address chargebacks due to other reasons like service or product dissatisfaction.
How does 3D Secure reduce fraud-related chargebacks?
3D Secure requires cardholders to authenticate themselves during a transaction, making it more difficult for unauthorised users to make fraudulent purchases, thereby reducing related chargebacks.
Can 3D Secure eliminate all types of chargebacks?
No, 3D Secure specifically targets chargebacks arising from fraud. It does not prevent chargebacks due to other issues, such as product returns, disputes over service quality, or processing errors.
What types of chargebacks are not affected by 3D Secure?
Chargebacks related to product quality, non-delivery, customer dissatisfaction, and billing errors are not directly affected by 3D Secure.
Does the implementation of 3D Secure shift liability for chargebacks?
Yes, in many cases, implementing 3D Secure shifts the liability for fraudulent chargebacks from the merchant to the card issuer.
