Future of High-Risk Payments: Comparing 2D and 3D Card Processing
High-risk business owners face intensified scrutiny in the advancing world of global commerce. For iGaming, Forex, IPTV, and e-commerce-leading businesses that endure fraud, regulatory compliance, and retaining customers, mainly, they will deal with how to process payments efficiently. Such businesses have a fundamental choice between 2D card processing and 3D Secure, which determines security, customer experience, and long-term profitability.
In this in-depth guide, we will discuss the nuances of 2D vs. 3D card processing, their roles in high-risk payments, and future trends that shape the industry.
Understanding High-Risk Payments
High-risk payments refer to transactions that pertain to industries or businesses that banks and other financial institutions tag as risky due to such aspects as:
High chargeback rate: there is much money reversed.
Susceptible to fraud: Susceptible to unauthorized or fraudulent transactions
Regulatory risks: Compliance with strict regulations and requirements
Reputational risks: Related to business models or industries which are controversial
Such businesses need strong payment processing solutions that not only minimize risks but also optimize the customer experience.
2D Card Processing
What is 2D card processing?
Two-dimensional card processing is a payment methodology by which transactions are executed without involving an extra layer of consumer validation. For such transactions, usually, such transactions require only the card details such as the card number, date of expiration, and CVV to complete the transaction process.
Advantages of 2D Card Processing.
Fast transaction : The payments are completed almost immediately without any additional form of verification
Customer's convenience: Less friction at checkout—thus reducing the rate of cart abandonment.
Common: Most payment gateways around the world and relatively easy to implement.
Low Operating Cost: Lower implementation and running costs.
Problems with 2D Card Processing:
Rogue Risk of Fraud: Easy to target by hackers or cyber malware persons
Charge Back Risk: Merchants are liable for inappropriate or disputed transactions
Not fully compliant: It often fails to meet strong level of compliance in countries such as the EU under PSD2
What is 3D Secure?
3D Secure is a security protocol that is advanced compared to other traditional solutions. It adds a further layer of security into online card transactions with the help of a one-time password or biometric data to prevent fraud attempts that may succeed.
How Does 3D Secure Work?
There are three domains that operate with the system, namely:
Advantages of 3D Secure to High Risk Payments:
Enhanced Security: Fraudulent transactions are inhibited as the cardholder is authenticated.
Chargeback Protection: Chargeback is made possible with the help of the card issuing bank after a dispute arises with any authenticated transaction.
Country Compliance: Most regulations, such as PSD2's SCA, are adhered to.
Customer Confidence: Customers are confident if an extra authentication process is implemented.
Multi-factor Support: It supports multi-factor authentication process with biometrics and one-time passwords.
Benefits Gained By Overthrowing 3D Secure
Customer Friction: The second layer process sometimes causes a delay in the experience; as a result, a cart is abandoned.
Integration Complexity: It needs technical support to integrate well with other already available payment gateways.
Set-up Costs: Higher set-up costs than 2D systems.
Comparing 2D and 3D Secure: A Deep Dive
Many businesses are between a rock and a hard place when it comes to selecting a payment processing model (2D or 3D secure). It, therefore, behooves one to know what each is.
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How 3D Secure Reduces Chargebacks
Chargebacks are a chronic problem with high-risk payments, hurting the bottom line of merchants and blurring their reputation. With 3D Secure, merchants can significantly mitigate the occurrence of chargebacks on account of:
Authentication Layers: The verification of the cardholder's approval regarding the transaction.
Fraud Detection Systems: Real-time identification and blocking of suspicious transactions.
Shifted Liability: Protecting merchants against costs of chargebacks in case of disputes.
Detailed data trails: easier resolution of disputes through comprehensive records of transactions.
Emerging Future of 3D Secure: 3D Secure 2.0
3D Secure 2.0 is the latest version of 3D Secure with much better capabilities over the previous one. It is now focused on security and usability.
Important Features of 3D Secure 2.0:
Frictionless Authentication: Relies on passive checks, like device fingerprints, for smooth transaction processing.
Mobile Friendliness: Desktop applications are now more optimized to support tablets and smartphones in line with the growing mobile commerce.
Data Sharing: Shares more data points with issuers to maximize fraud detection accuracy.
High-Risk Payment Processing Trends
The playing field for high-risk payments will continue to shift. The below are the emerging trends that will influence the sector:
1. AI Fraud Prevention
Artificial intelligence is proving to be the next big thing in real-time fraud detection. Transaction patterns can be analyzed, and suspected cases of anomalies can be identified through AI, thus halting fraud transactions.
2. Biometric Authentication
Biometric methods like facial recognition and fingerprint scanning are more mainstream than ever and, altogether, very secure.
3. Blockchain in Payment
Blockchain technology provides transparency, decentralization, as well as immutability to transactions, making it an invaluable tool for the proper processing of payments.
4. Cross-Border Payment Solutions
More and more high-risk businesses use the multi-currency and cross-border payment gateways with the growing e-commerce business across the globe.
5. Dynamic Payment Gateways
Flexible, Increased-Protection Merchant services Payment providers are infusing dynamic routing and multi-layered security in merchant services, as it offers more flexibility and greater protection.
Choosing the Right Payment Processing Solution
Choose between 2D card processing and 3D Secure, depending on several factors:
Business Type: High-risk businesses are suited well with 3D Secure.
Customer Base: Customer demographics with superior technology literacy may appreciate the added security of 3D Secure.
Geographic Markets: Stricter regions such as the EU require adoption of 3D Secure protocols.
Why Hire Payments Clarity for Your High-Risk Payments?
We at Payments Clarity provide specifically designed solutions for businesses dealing with the intricacies of both 2D and 3D card processing.
What Makes Us Special?
End-to-End Service: Our network provides seamless integration, and we maintain it all.
Comprehensive Solution: Fraud prevention tool and chargeback management through advanced technology.
Global Expertise: Across national boundaries, region-specific, and compliant solutions for our clients.
Scalability: Solutions that grow up with your business needs.
Call to Action
The time for secure and reliable payment systems has finally arrived. Be in touch with Payments Clarity for more on 2D and 3D card processing services. We help you in protecting your transactions, chargebacks, and successful payment experiences for your customers.