3RI Is A Technical Lever

Saving your customers from the annoying 3DS challenges, especially when they aren't around to perform them.

Many American businesses find 3DS annoying.

3DS is a very rare thing in the US, and even in Europe it takes conversion down by 30%. So it’s natural for US businesses operating in Europe to avoid it, especially for subscriptions. They cling to the fact that you can treat Recurring payments as out of 3DS scope (Visa) or as an exemption (Mastercard) and prefer not to use it if possible.

But that’s a mistake.

It’s pretty clear for everyone in the payments industry that 3DS works differently on each side of the Atlantic. And yet, these two articles are the only ones on the entire Internet that make this divide explicit.

The Customer Must Never Know: The American Way of Building 3DS

Exemptions and Data Science: The European Way of Building 3DS

Still, the problem with vanilla 3DS is that it is performed per payment.

That’s limiting for companies who expect multiple payments from the same customer, and are unwilling to risk that 30% conversion hit every time:

• Of course, Netflix, Spotify, or this newsletter, which offer a form of digital product in exchange for a subscription. This is called Recurring.

• Travel agencies who needs the customer to pay for the airline tickets, and the hotels, and the activities, and so on, each at their specific times. This is Multiple-Merchant payment.

• E-commerce sites who sell a certain kind of products (shavers, contact lenses, vitamins) on a frequent basis, and for whom the critical piece of UX is that the customer doesn’t have to do anything for years on end. This is called Split Shipment.

• Car rentals, not because there are multiple payments but because the customer would rather authorize a $0 payment and pay for any potential damages in the future than paying a huge security deposit upfront. Its name is Delayed Shipment.

These aren’t niche cases, and yet 3DS is ill-suited for them. It is either a source of friction for an already authenticated user, or simply impossible to get through because the user is not there to complete the challenge.

Thankfully, there’s a solution for that.

I’m Alvaro Duran and this is The Payments Engineer Playbook. If you’re a free subscriber, you can check The American Way and The European Way of Building 3DS for free. But if you’re a paid subscriber, I’m going to tell you about Merchant Initiated Authentication, the variant of 3DS that provides the security of 3DS for recurrent payments.

Let’s dive in.