The day that 3DS2 overtook 3DS1

On March 16^th 2021, Nuvei recorded transaction approval rates for 3DS2 surpassing those of 3DS1 for our merchants for the first time. With PSD2 in effect across most of Europe for only three months, and much industry worry about the transition, this is a remarkable achievement.

The dramatic improvement in transaction approval rates at this time of transition is a result of our ongoing adjustments, optimization suite, and the hard work we’ve put in to making the transition smooth for our merchants.

So how have we achieved this? Our success can be broken into two parts – technological and strategic.

Unique technology

Our routing engine uses advanced data analytics to send transactions to the pathway most likely to gain approval. In cases where a 3DS2 transaction encounters a soft decline – such as a technical failure or a purchase flagged because the issuer considers it unusual – our smart routing engine will automatically reprocess to 3DS1 to try again, reducing transaction declines and lost conversions.

Issuers have critical role in the payment journey and so we keep track of their performance too. The information is fed into our routing engine, allowing us to exclude some issuers from 3DS2 processing entirely, further improving acceptance rates. This is necessary because issuers in some countries are still struggling with implementing the new regulations – but more on that later.

We’re very proud of Dynamic 3DS – we built it with a number of characteristics that are truly unique. For example, our smart routing engine is not only compatible through all integration channels (API, SDK, payment page, etc.), it cascades between authentication alternatives completely seamlessly, requiring no input from the merchant or customer. At the same time, all processes are displayed with full transparency in the Control Panel, giving merchants access to data which they can use to make adjustments as needed.

Strategic approach

A large part of our success can be attributed to our people-first strategy. We maintain strong communication channels with our merchants, allowing us to address their needs in real-time. We also employ a dedicated team of analysts who continuously monitor performances – of our routing engine, of our acquiring partners, of issuers, of our merchants – and make adjustments accordingly.

Solving approval issues in Italy

As mentioned before, some regions have been slow to adapt to PSD2. In Italy, for example, some issuers have been registering transaction approval rates as low as 30 percent. Nuvei’s Dynamic 3D Secure has been extremely effective in this region.

By utilizing our exemption engine, we were able to guide many transactions through the 3DS1 route, where approvals are 25 percent higher. By using the best performing version per issuer, we’ve achieved the highest possible conversion rates. In addition, we are directing declined 3DS1 transactions to non-3DS routes in cases of soft declines, further improving acceptance ratios.

The future

3DS1 won’t be around forever – both Visa and Mastercard intend to discontinue processing in October 2022 in the EU – but Nuvei will continue using it as long as it can improve revenue streams for our clients while still maintaining full compliance. What we can say for sure at this point is that Nuvei merchants are benefitting from our innovative approach to PSD2 compliance, enjoying high transaction approvals, fewer chargebacks, and the confidence that their payment provider is working hard for them. the future is about applying ML technology for exemption optimization and balancing between minimum conversion and maximum security and liability.