Stricter security requirements are the reason for the swift development of digital payments in Europe. It is particularly since PSD2 introduced Strong Customer Authentication (SCA). The mandate forces issuers and merchants to improve authentication without slowing down customers, even though it greatly increases ecosystem safety. This balance between security and smooth checkout was always difficult, until the arrival of 3DS 2.0.
It specifically is there to support SCA.
- Fills the void between regulatory compliance and user experience
- Secures digital transactions
- Reduces fraud
- Keeps conversion rates healthy even under tight authentication rules
Read on to understand how, through exploring both the need for SCA and what makes 3DS 2.0 uniquely suited for meeting it.
Why SCA Matters and Why it is Hard
Online payment fraud forces regulators to rethink the available security standards. Globally, businesses can lose an estimation of $362 billion to payment fraud between 2023 and 2028. Europe’s answer to this challenge is SCA. And that is this rule that requires two independent factors to verify a payer’s identity for most digital transactions.
These factors fall into three categories:
- Possession – something only the user has
- Knowledge – something only the user knows
- Inherence – something the user biologically is
In theory, this sounds simple. But when it comes into practice, it forces users through multiple checks and slows transactions. It drives cart abandonment and hurts conversion rates. Older systems like 3DS 1.0 relied heavily on static passwords and clunky redirects, often leading to drop-offs. This is precisely the gap 3DS 2.0 was designed to fix.
Also Read: Data Privacy in Mobile Apps: How to Build User Trust
How 3DS 2.0 Helps Businesses Meet SCA Requirements
Unlike its predecessor, 3DS 2.0 was built from the ground up to support SCA without overwhelming customers with extra steps. It delivers compliance while prioritizing seamless, mobile-first payment experiences.
Below are the key ways 3DS 2.0 supports SCA effectively.
Delivers the Two SCA Factors Within a Single Flow
SCA requires any two factors from knowledge, possession, and inherence. 3DS 2.0 carries these combinations inside a unified authentication flow. Issuers can choose any pairing, OTP + device binding, Face ID + PIN, fingerprint + OTP, etc., and the protocol handles it natively.
Whenever a challenge flow is triggered, 3DS 2.0 automatically meets the SCA requirement because:
- Two independent factors are captured
- The challenge is executed inside the issuer-controlled environment
- The transaction is cryptographically secured
Merchants and issuers do not need separate systems to meet SCA; 3DS 2.0 fulfills the requirement by design.
Enables Frictionless SCA When Risk Is Low
One of the biggest advantages of 3DS 2.0 is its support for risk-based authentication, which allows SCA to happen behind the scenes.
The protocol enables merchants to send over 150+ data elements to the issuer, such as:
- Device fingerprint
- Geolocation
- Shipping address
- Transaction history
- Account age
- Behavioral patterns
Issuers process this information through real-time machine learning models. If the transaction looks safe:
- The issuer approves it without additional customer input
- The device and cryptographic app signature act as the two SCA factors
- The flow remains invisible to the consumer
Even without a visible challenge, SCA is still considered performed, and the transaction is fully compliant. This frictionless capability is one of the biggest reasons 3DS 2.0 dramatically reduces checkout abandonment.
Also Read: Top Android Security Apps to Protect Your Device
Provides Clear and Fast Challenge Flows for High-Risk Scenarios
When risk is high, 3DS 2.0 triggers a step-up authentication flow. But unlike the outdated pop-ups from 3DS 1.0, this challenge is:
- Embedded inside the app or browser
- Mobile-optimised
- Bank-branded
- Compatible with biometrics
Issuers can request strong, user-friendly verification such as:
- Face ID
- Fingerprint
- PIN
- Pattern unlock
- Push approval in the banking app
The step-up occurs within milliseconds, still meeting SCA requirements while minimizing friction.
Handles PSD2-Specific SCA Exemptions Smoothly
PSD2 allows certain exemptions where SCA may be reduced or skipped, provided risk conditions are met. 3DS 2.0 carries these exemption flags within its messages, allowing merchants and issuers to coordinate seamlessly.
Supported exemptions include:
- Low-value transactions
- TRA (Transaction Risk Analysis)
- Whitelisted or trusted beneficiaries
- Subscription and Merchant-Initiated Transactions (MITs)
Merchants can request exemptions, and issuers can accept or override them. Either way, 3DS 2.0 ensures audit trails and compliance requirements are preserved.
Works Across All Channels and Devices for Consistent SCA
Modern commerce is multi-device and multi-platform. 3DS 2.0 supports SCA across:
- Mobile apps
- Desktop browsers
- Modern web-views
- Wearables
- IoT devices
Native iOS and Android SDKs ensure that authentication processes like fingerprint or Face ID feel natural inside the app environment. This ensures SCA compliance without compromising usability. It was a limitation that 3DS 1.0 could never overcome.
Backed by EU Regulators
The European Banking Authority has explicitly recognised EMV 3-D Secure (2.0 and above) as a compliant tool for delivering SCA, provided issuers configure it to ensure two independent factors are validated.
Also Read: IT Security Threats and Vulnerabilities: Risks and How to Mitigate Them
Why 3DS 2.0 Matters Today
Beyond just compliance, 3DS 2.0 significantly strengthens fraud prevention. With over 150+ data elements exchanged, issuers get deeper insights into:
- Device behavior
- Transaction contexts
- Customer purchasing patterns
- Risk signals
This enables smarter decision-making that protects merchants from chargebacks and customers from unauthorised use, all while maintaining a smooth checkout experience.
The protocol also supports liability shifts, reduces false declines, and improves success rates for genuine transactions. For businesses operating in Europe, adopting 3DS 2.0 is no longer about checking a regulatory box; it is about building trust and minimizing friction in a digital-first world.
Conclusion
SCA mandates strong security, but customers won’t tolerate slow or clumsy authentication. 3DS 2.0 solves this challenge by offering robust, compliant, and ultra-flexible authentication that adapts to risk, device, and regulatory demands.
It stands at the intersection of compliance and convenience, ensuring that payments remain both safe and smooth as digital commerce continues to grow.
