The main reason that EMV 3DS is so important is because of false declines. False declines can happen when merchants and issuers are fearful of fraud losses. If there is a chance that a transaction could be fraudulent, merchants may opt to decline rather than risk a chargeback. If an issuer’s fraud controls are too strict, the result can also lead to false declines.
Why are false declines an issue?
False declines are big issue for card not present (CNP) transactions. When a consumer experiences a false decline they are likely to either choose another card to pay with, this impacts the issue of the original payment card, or abandon the transaction and use a different merchant, this impacts the original merchant. This can also mean that the consumer will not use that card or merchant’s website for some time.
How does EMV 3DS help?
Issuers want consumers to use their payment cards but on the other hand, when a consumer makes a CNP (card not present) purchase, the issuer may not have a lot of data to determine whether the person initiating that transaction is really the cardholder. This is where EMV 3DS helps as more data is shared with the issuer with these updated protocols, which they can feed into their risk engines and compare with what they know about their cardholder, to make more confident risk decisions.