Read the AITE Report! Maximizing the Potential of CNP: Collaboration via 3-D Secure is the Key

The largest-ever global study of EMV® 3-D Secure (3DS) adoption finds that its unrivalled value in defeating card-not-present (CNP) fraud can be dramatically amplified with participation from the vast majority of the card payment ecosystem.

For merchants, card companies, and payments networks, the payoff could be huge. After swelling to $4.2 trillion this past year, the research from Outseer and Aite-Novarica Group estimates that total e-commerce sales could hit $5.9 trillion by 2023. And that could be low-balling it, if consumer enthusiasm for CNP-enabled online and mobile purchases and popular payment options like Buy-Online-Pickup-in-Store (BOPIS) continues to intensify.

Of course, revenues are one thing, profits another. As digital channel sales have been reaching new heights over the past 18 months, so has CNP fraud. Within the next two years, this crime could lead to $17.2 billion in lost revenue annually.

But data from the study also demonstrates that as digital commerce and new payment models scale, 3DS is proving remarkably effective in helping to strike the optimum balance between mitigating risk and maintaining a seamless customer experience.

That alone warrants a collective sigh of relief. Even better: Evidence showing that as crucial as 3DS adoption can be for individual organizations, the benefits grow exponentially more pronounced when adoption among other organizations reaches critical mass. To understand why, let’s look at some key findings from the study.

3-D Secure Adoption: More Isn’t Just More—It’s Stronger

Today, growth of 3-D Secure deployment among merchants, issuers, payments networks and governments is accelerating across all geographies. During the first half of 2021, the total share of 3DS-enabled transactions grew 79% worldwide. In regions like the UK and the European Union, nearly half (46%) of all CNP transactions are now 3DS-protected—up from just 7% in the third quarter of 2020.

Unfortunately, the pace of all this growth isn’t distributed evenly. According to the Aite-Novarica Group research, the US lags behind regions like the EU, India, and Australia, where either governmental or payment network mandates for multifactor authentication (MFA) are in effect and where 3DS is seen as an essential deterrent to CNP fraud.

In the US, this disparity contributes to what is estimated to be $7.9 billion in CNP fraud loss in 2021. That’s more than half the total $15.3 billion in CNP fraud loss expected this year in all other regions combined.

In fact, one of the clearest findings in the research is how much the benefits of 3DS adoption accrue when there is widespread participation from issuers and merchants. In the EU, for example, net CNP fraud loss hovers at a manageable 7 basis points. In the US, net CNP fraud is 17 bps.

Stopping Fraud, Boosting Profits

That last part is reason enough for organizations in the US that might want to put 3DS adoption front and center—but as our CEO Reed Taussig recently pointed out, there’s plenty more. 3-D Secure isn’t just a good idea in terms of loss prevention, either. It’s actually a boon to business.

That’s because 3DS-based solutions analyze hundreds of risk indicators to silently authenticate customers before a transaction even happens, enabling merchants and issuers to deliver a fast, friendly checkout experience to legitimate customers while blocking fraudsters at the door.

Our own solution, for example, enhances 3DS with identity science and globally shared transaction data to prevent more than 95% of all fraud loss while reserving step-up challenges for that scant 5% of all transactions that are high risk. In just the first half of 2021, we’ve protected more than $100 billion in CNP transactions worldwide.

But there’s also another benefit. Solutions employing 3-D Secure has been shown to reduce checkout times by 85% and cart abandonment by 70%. Put it all together, and for merchants and card issuers, it means more revenue and more profitability. And if the findings in the Aite-Novarica study are any indication, the more organizations to join the party, the merrier it is for everyone but the fraudsters.

To learn more global adoption trends for EMV 3-D Secure and its ability to protect against CNP fraud, download a complimentary copy of the report: “Maximizing the Potential of CNP” from Outseer and Aite-Novarica Group, here.

Armen Najarian

CMO + Chief Identity Officer

Armen is a 15-year Silicon Valley veteran with deep experience leading the marketing function for fast-growing fraud prevention, predictive analytics, and cybersecurity companies. His most recent leadership roles include CMO positions at Agari and ThreatMetrix, the latter of which he established as the definitive category leader for digital identity solutions.