Dynamic 3DS: fraud protection that won’t cost you conversions

South Africa’s e-commerce industry is expected to reach $74.79 billion by 2033 from $35.23 billion in 2024. The growth is driven by improving consumer confidence in online shopping and flexible payment methods that are becoming more available. 

Card payments dominate the space, requiring merchants to partner with payment service providers like Stitch to process and secure their payments. An essential part of this process is authenticating the cardholder’s identity to prevent card payment fraud. 

What is 3DS and how does it prevent fraud?

3D Secure (3DS), or 3 Domain Secure, is a cardholder authentication protocol for card-not-present (CNP) transactions. It verifies the cardholder’s identity through the issuing bank’s security process. This may involve risk-based authentication, one-time passwords (OTPs), biometrics or via banking app approvals.

How it works:

1. The customer enters their card details on the checkout page.
2. The merchant’s payment gateway sends the transaction details to the card issuer and requests for 3DS authentication.
3. The issuing bank prompts the cardholder to verify their identity via a pin, biometric or confirmation on their banking app.
4. If authentication is successful, the system confirms their identity and completes the payment.

How does dynamic 3DS streamline payments?

Not all transactions carry the same level of risk. Lower-risk transactions may qualify for a smoother checkout process by skipping the authentication process. Higher-risk transactions may require authentication every time, risking a seamless payment journey. Merchants need to find a balance between security and not making the checkout process a burden. To do this, they need a dynamic 3DS set up. What does that mean?

3DS can be configured to match a merchant’s risk tolerance and transaction types. Stitch offers configuration options to tailor 3D Secure settings, enabling merchants to decide between no authentication ( higher risk appetite) or always-on authentication (for maximum security). Each configuration helps merchants keep online purchases safe while defending against failed payments and chargebacks: 

Why is it worth the investment?

3DS prevents card fraud but it also presents opportunities for the business to drive revenue and growth:  

• Regulatory compliance: 3DS is mandatory for e-commerce merchants in South Africa. Industry bodies also advise consumers to avoid shopping with merchants who do not support it.

• Higher conversion rates: Customers are more likely to complete their purchase and return when they trust that their payments are safe. 

• Lower transaction fees: 3DS can help protect profit margins by reducing transaction fees. The multi-factor authentication reduces fraud risk, leading to lower interchange fees compared to non-authenticated payments. Authenticated payments also lead to fewer chargebacks costs. 

• Liability shift: The issuing bank is more likely to approve the transaction if 3DS has been enabled. When authentication is successful, the liability shifts from the merchant to the issuer – protecting the merchant from fraud losses. 

Always on - online card payments

Never miss an opportunity to complete an online sale. Leverage Stitch’s extensive acquirer and 3DS provider network to ensure high availability and uptime for card payments made anytime, anywhere.

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FAQs

What is dynamic 3DS?

Dynamic 3DS is an adaptive fraud protection approach that applies 3D Secure authentication only when a transaction is deemed high risk, rather than on every payment.

How does dynamic 3DS differ from traditional 3DS?

Traditional 3DS challenges every transaction, which can add friction. Dynamic 3DS selectively triggers authentication, balancing fraud prevention with conversion performance.

How does dynamic 3DS protect against fraud?

It uses risk assessment, transaction data, and behavioural signals to identify suspicious payments and apply additional verification only when necessary.

Why can 3DS hurt conversion rates?

Mandatory authentication adds extra steps to checkout. Applying 3DS unnecessarily can increase drop-off and abandoned payments.

Which businesses benefit most from dynamic 3DS?

E-commerce merchants, subscription businesses, and high-volume card users benefit from reduced fraud while maintaining smooth customer experiences.

Is dynamic 3DS suitable for South African card payments?

Yes. Dynamic 3DS helps South African businesses manage fraud risk while minimising friction, especially during peak online shopping periods.

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