"3D Secure is the online equivalent of a PIN," says Peter Harvey, founder and MD of Internet payment gateway provider PayGate. "Cardholders have to enter an extra password to complete an online purchase. That adds a layer of protection against fraud for both the buyer and the seller. If the seller isn't using 3D Secure and a fraudulent payment is made, they could be forced to refund it up to six months later."
But, says Harvey, 3D Secure is not widely implemented yet, so customers often mistake it for a phishing scam when they first encounter it - which is where the banks come in. "The only people who have the clout to make sure 3D actually works are the banks. At the moment we have a vicious circle; 3D Secure is not widespread so customers don't trust it. Between 15% and 20% will abandon the transaction when they are asked for an extra password. So merchants don't want to implement the system. Nobody wants to be first because they'll lose out."
The solution is for the banks to get together and simultaneously force all online merchants to use 3D Secure, starting with the biggest online players of all, the airlines. "Between them our airlines are processing many thousands of online transactions every month. If they and a couple of other big e-commerce sites implemented 3D Secure, consumer perception would change very quickly and the smaller merchants would follow on naturally," Harvey says.
Banks should also do more to educate consumers. "The 3D Secure screen that an online buyer sees belongs to and is designed by the bank, not by the merchant. Currently those screens do very little to reassure customers that what they're seeing is legitimate - fixing that visual presentation could make a big difference."
The pain, Harvey believes, will quickly be outweighed by the gain. "It's going to be painful in the short term no matter what we do," he says. "But by dragging it out in the current piecemeal way we're just extending the suffering. If it's worth doing, let's just get it over with - there will be lots of complaints in the first month but then it will be over."
"On the other hand, if 3D Secure is not worth doing, let's just scrap the whole thing. The current situation, where the banks are forcing it on some smaller merchants but letting the big ones off, is not fair to anybody. It's time our banks acted decisively," Harvey concludes.
