As 3DS2 rolls out across Europe, don’t rest on your laurels
While implementation of 3DS2 has not always been smooth in some EU countries - Bulgaria, Romania, Italy and Spain to name a few - in general, not much has changed and soft declines are still low
I for one was pleased to see that the Millennium Bug of the modern age didn’t bring payments in Europe to a crashing standstill. Of course, I am talking about 3DS2 and its January 1st 2021 deadline. While implementation of 3DS2 has not always been smooth in some EU countries – Bulgaria, Romania, Italy and Spain to name a few – in general, not much has changed and soft declines are still low.
This means the majority of non-3D transactions flagged with exemptions are being accepted without friction, whilst most issuers appear to be ignoring 3DS exemption requests. We expect the situation to evolve over the coming months, so it’s important to stay on top of the changing trends within the markets from which you accept payments.
My key piece of advice is this – do not fall into the trap of thinking that the subject of 3DS2 and Strong Customer Authentication is now closed. Businesses have to get the balance right between high acceptance rates and abandoned shopping carts, while also understanding how acceptance rates are calculated by their acquirers, which may not always be clear. There are no one-size-fits-all approaches here – you will need to analyse your performance market by market.
3DS1 still has its part to play, especially during these early months as issuers and consumers get used to 3DS2. And even though the user experience is enhanced by 3DS2, acceptance rates can be better with version 1.
However, the countdown to 3DS1 being decommissioned is running – Mastercard has given a deadline of October 14th 2022, and Visa on October 15th 2022. Previously, Visa had intended to shift chargeback liability back to merchants for 3DS1 transactions, however this change (planned for October 16th 2021) was cancelled and liability will stay with the issuer in these cases
The UK will be the last territory to enforce SCA, with its final deadline of September 14th 2021. There, 3DS2 is already proving a success by increasing acceptance rates, so it will be a much smoother transition. However, operators will face a different challenge when accepting transactions issued from the UK. As of October 15th 2021, Mastercard interchange rates will increase for credit and debit transactions between UK-issued cards and EEA operators – from 0.20% and 0.30% to 1.15% and 1.50% respectively.
In the past, this wouldn’t have had too much impact. However, with First Direct migrating its debit cards to Mastercard last year and NatWest’s recent announcement that it will be doing the same, Mastercard stands to gain one third of the UK debit market. This change will also have an impact on gaming operators, as Mastercard withdrawals are more expensive than Visa Direct and subsequently these volumes will increase as well.
Don’t wait for this to creep up on you – start analyzing your transactions now to assess the impact of 3DS2 and look for ways to manage these changes. Weigh up the pros and cons of switching to a UK entity and futureproof your business with open banking, not just for pay-outs but for payments too, especially for the next generation of consumer. Now more than ever it’s crucial to keep your eyes on your processing performance to avoid any payment traps.
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