Are you ready for 3DS?

The Japan Credit Association (JCA) has mandated the use of EMV 3D Secure (3DS) for all Japanese credit card transactions, effective March 2025. This is part of new Credit Card Security Guidelines introduced by Japan’s Ministry of Economy, Trade and Industry (METI) to combat rising credit card fraud.

Key points

• Mandatory adoption by 2025: By the end of March 2025, in principle, all e-commerce merchants (EC merchants) in Japan will be required to implement 3DS. This mandate is driven by the increasing number of fraudulent transactions utilizing stolen credit card information.
• Increased registration rate: Credit card issuers are urged to proactively encourage their cardholders to register for 3DS and aim for an 80% registration rate among EC users by the end of March 2025.
• Risk-based authentication: 3DS implementation will leverage risk-based authentication (RBA) to assess the risk level of each transaction. Depending on the risk level, different authentication flows will be applied (frictionless, challenge, or decline).
• Shift to dynamic passwords: Issuers are encouraged to transition from static (fixed) passwords to dynamic (one-time) passwords for 3DS authentication. The goal is to achieve a 100% migration rate among registered 3DS users by the end of March 2025.
• System stability: Continuous efforts are required to ensure the stable operation of 3DS systems.
• Collaboration for implementation: Successful 3DS implementation requires collaboration between various stakeholders, including issuers, acquirers, payment service providers (PSPs), and merchants.

What actually is 3DS?

3DS, which stands for 3-D Secure, is an extra layer of security for online credit and debit card transactions. It’s designed to protect you and the merchant from unauthorized use of your card by verifying your identity during checkout.

Think of it as a digital handshake between you, the merchant, and your card issuer. Instead of just entering your card details, 3DS adds an additional step where you confirm your identity.

Here’s how it generally works:

1. Checkout: You shop online and proceed to checkout, entering your card information as usual.
2. Redirection: If the merchant uses 3DS, you’ll be redirected to your card issuer’s website or app.
3. Authentication: You’ll be asked to verify your identity. This usually involves:
   - One-Time Password (OTP): A code sent to your phone or email.
   - Biometrics: Fingerprint scan or facial recognition.
   - Security Questions: Questions only you would know the answer to.
4. Confirmation: Once you successfully authenticate, your card issuer confirms to the merchant that you are the legitimate cardholder.
5. Transaction Completion: The transaction proceeds as usual.

Benefits of 3DS:

• Reduced Fraud: It helps prevent unauthorized transactions by verifying your identity.
• Liability Shift: In most cases, the liability for fraudulent transactions shifts to the card issuer if 3DS is used.
• Increased Confidence: Consumers feel more secure making online purchases with 3DS.
• Improved Customer Experience: Some 3DS implementations (like frictionless flow) don’t require extra steps if the transaction is deemed low risk, making the checkout process smoother.

Types of 3DS:

• 3DS 1.0: The original version, often involved static passwords and pop-up windows, which could be cumbersome.
• 3DS 2.0: Introduced improved security and user experience with risk-based authentication and less reliance on static passwords.
• EMV 3DS: The latest version, further enhances security and user experience with biometrics, mobile-friendly interfaces, and a wider range of authentication methods.

Overall, 3DS is an important security protocol that makes online shopping safer for everyone involved. It’s becoming increasingly common as more merchants and card issuers adopt it to combat online fraud.

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