Our Clients Have Been Using 3D Secure for Years – Here’s What We Know

We probably don’t have to tell you that fraud is a painful problem in the ticketing industry and beyond. As stories about chargebacks make their way through our sector, we know that arts and events leaders like you are thinking strategically about how to protect your organization from fraud and other costly headaches. And we believe that you should be able to talk to your ticketing and payment processing providers about this issue. 

We’re hearing buzz here in the US around a fraud prevention tool called 3DSecure, so we wanted to take a moment to break it down for you. 3DSecure has been a requirement in the UK and Europe across industries for years – so as a global ticketing software company, we already have experience using it with our clients.

Adoption of 3D Secure has so far been slow in the US, and the situation stateside will likely have its own unique sets of challenges. So, we can’t promise that there are no trade-offs or that we have all the answers. But, we know the technology and we have fraud expertise on our team – we’re here to partner with you to tackle the fraud problem together.

What is 3D Secure?

3D Secure is an extra layer of payment protection that relies on identity verification.  It adds another step to the purchase process in order to check that the person making the purchase is a) a real human and b) the actual owner of the card that they’re using. 

Here’s what it looks like:

1. A customer tries to make a purchase on your website.

2. They receive a prompt from their bank or credit card company to verify their identity.*

3. They follow instructions on how to verify, similar to 2-factor authentication commonly used to log into an account. This could mean entering a code that’s emailed to them or using fingerprint/face ID technology,

4. Once their identity is verified, the customer continues making their purchase, and you can be confident that they are who they say they are.

* Note that not every online transaction will necessarily trigger identity verification. The bank/credit card company will have their own parameters for when that step is triggered. 

If you’ve used Apple Pay or Google Pay, think about how you use your fingerprint, Face ID, or passcode to prove your identity whenever you make a purchase. It’s a similar concept!

Know these terms

Let’s cut through some of the jargon around this topic. As you look into 3D Secure, you might hear some of these terms:

Cardholder

The owner of a credit card. In this context, it’s the customer who is making a purchase at your organization.

Card Issuer

The bank or financial institution that provides the credit/debit card being used by your customer. In other words, if someone is using a Visa credit card to buy tickets at your venue, then Visa would be the “card issuer.”

Merchant

The venue/company that is selling the product. So, if you’re a theater or arts organization making sales, you are the merchant. 

Chargeback fraud or friendly fraud

 When customers purchase tickets and then dispute the charge with their bank, claiming they didn’t make the purchase or that the tickets weren’t delivered. This type of fraud is often committed by actual customers who received their tickets but are trying to avoid paying for them.

How could 3D Secure help in the arts and live events?

3D Secure has the potential to mitigate fraud at your organization. We use that word because it can be a really useful tool, but it’s not a silver bullet that’s going to make all fraud go away forever. 

One of the most powerful benefits of 3D Secure is a shift in liability. When using 3D Secure, it’s the card issuer’s responsibility to check that the card is being used by the person using it –  it’s not your responsibility. 

Because they had to verify their identity with the card issuer to make their purchase, it’s harder for customers to claim that their card was used at your organization without their permission. It also means that any bad actor using a stolen credit card isn’t able to put the purchase through. Ideally, that will result in fewer chargeback incidents that you have to work through. 

Find the right balance between risk and friction

Our approach to fraud prevention is all about helping you to find balance for your organization. You surely want to reduce the risk of fraud – but you also need to weigh any measures you take against the possible risk of disrupting the customer experience. 

We advise that you think about human behavior when considering 3D Secure. It’s an extra layer of protection, but it could also add friction. The verification process happens within the card issuer’s space, so the customer is directed away from your website for a moment. As with any process change that people need to adjust to, this will typically mean an initial drop-off in the overall number of transactions that go through. If that happens, don’t panic – it may just take some time for full adoption to set in. 

You should also be aware that 3D Secure comes with a small fee that's based on how many transactions go through it, even if the transactions are not fraudulent. Typically, this type of fee will be charged to your payment provider who may then pass the cost on to you – it does not go directly to your customers. Ask your payment provider about what this would look like for you.

For many organizations, those tradeoffs will be worth the protection that 3D Secure provides – especially if chargebacks have been costing you a significant amount of money and time. Every organization will have their own special recipe for fraud prevention that works for them. You may need to test and try a few different approaches to find what works. 

Communicate with your customers about verification

We recommend that you prepare to communicate with your customers about the extra verification step they’ll go through with 3D Secure. 

• Make sure your box office and customer service teams are prepared to answer questions about the verification process. 
• Caution team members against simply running the transaction over the phone for customers struggling with verification. 
• Frame it to customers as a benefit for their protection and an increasing norm of online purchases. You can say something like, “To enhance security, your bank may ask you to verify your payment via SMS, app, or biometrics.” 
• Advise that customers speak to their own banks to understand the process and where challenges arise. Card issuers may vary on how they authenticate transactions.
  
  
  

Which fraud prevention solutions are right for you?

The prospect of a tool that could prevent chargeback disputes is understandably very exciting for arts organizations. But, no single tool exists that can fully fix the problem, and you have to weigh anything you implement with the friction it could cause. The good news is that there are many options available, including 3D Secure, and, perhaps with a little experimentation, you can find the right combination for your situation. 

If you’re a Spektrix client looking to get started with 3D Secure and other fraud prevention methods – let us know! As always, we’re here to answer your questions. Plus, we’re looking for users in the US and Canada who are eager to get started with our newest tools. 

Shariffa Chebichi (she/her) is the Payments Solution Lead at Spektrix.