3D Secure and conversion rates

[cbarling]

Yesterday I attended the IMRG meeting on payments, where various industry luminaries were in attendance.

I thought what would be of interest were some figures for conversion rates when using and not using 3D Secure. This was based on an analysis of several million transactions and yielded the following figures.

Currently in the UK market around 40% of all transactions are going through 3D Secure, and this has been rising steadily over time. The number of payments that appear to be abandoned as a result of switching 3D Secure on is 2.2%. (Some of these might be fraudulent transactions where the fraudster decided not to bother when they realised 3D secure checking was on).

But with 3D Secure on the authorisation rate of payments rises from 87% to 93%, a 6% improvement. In other words the banks authorise a significantly higher percentage when 3D Secure is switched on.

So it was suggested that you will get 3.8% more conversions with 3D secure while generally having lower fees and less fraud. Of course, results will vary by sector and business.

I asked the panel what the typical UK merchant should do about 3D Secure. All of them agreed that “the average merchant should switch it on” and the comment was made that “consumers are a lot more open to 3D Secure and expect it now”.

In fact, the trend towards 3D Secure seemed to be accepted by all of the panel. They repersenetd a wide variety of paymnet companies and as far as I could see, none of them would gain any direct benefit from increased 3D Secure adoption.

IMRG runs under the Chatham House rules so I’m not allowed tro identify the companies.

I would be very interested in other people's thoughts on this and in particular any recent merchant experiences of switching 3D Secure on or off.

Chris

[Darren B]

I have been using 3D for along time now, for me it was an added insurance should it be a dodgy transaction. I did not see any decline in sales and i also have a small write up on my site to try and explain a little about it.

That said though, i dont know who the panel is but you mention from the payment industry and this to me does not give me confidence when they mention "most people come to expect it".

I dont doubt that the info you have given is factual with regards the drop out rates as these guys are in the position to analyse that data.

but this part

I asked the panel what the typical UK merchant should do about 3D Secure. All of them agreed that “the average merchant should switch it on” and the comment was made that “consumers are a lot more open to 3D Secure and expect it now”.

Im sure most people with not agree totally with this all the knowledge i have is from the business side of things, as yet i still have never recieved any info from either mastercard visa or my bank. So from a customers perspective you might have never come across it before. Online sales are forever growing and i bet a large % of these are likely to be new customers, if so then they would not have come across it before.

Just my thoughts
Darren

[cbarling]

I tend to agree. No one had any actual information on the depth of knowledge of 3D Secure across the population.

Having said that, I have personally noticed that when shopping online 3D Secure gets asked for more often these days.

The panel did stress that things vary depending on the sector you are in. I think that this is most likely true and 3D Secure is good for some merchants and may still be bad for some. It's just that this latter group is getting smaller over time.

Chris

[Darren B]

As with all things it takes time to settle in, just a shame the banks / credit card companies handled it in such a bad way. a bit of literature instead of the tons of junk mail would probably of made a big difference.

[Mike Hughes]

I suspect these numbers don't show the whole truth. My own take, using the same figures are somewhat different.

1. The increase in abandoned transaction with 3d secure on could well be in the order of 2.2% for the large companies reporting. For smaller companies who are less well known / trusted it's likely to be larger. I wouldn't be surprised if it was more like 5%.

I always follow up abandoned transactions with an email and regularly get replies about being transfered somewhere they didn't recognise or a new window opening and freezing. The single biggest failure I see on payments is "3d secure timeout".

2. This bit about authorising a higher percentage of 3d payments is probably a red herring. I suspect that what's happening is that there are a large number of certain non-3d secure payments being rejected that are distorting the figures and so not comparing like with like.

I know my wife's visa card regularly has itunes payments blocked (which of course being one-click are not 3d secure). It happens so often that she now buys vouchers and uses them instead. Multiply this by the number of transactions itunes and the like are doing and this would quite easily account for why more non-3d transactions are being rejected. It doesn't mean it's the same thing for normal ecommerce transactions.

In fact I find it hard to believe that a normal ecommerce transaction, complete with address checking, is more likely to be rejected by the bank than a 3d secure one. There's no good reason for this to be the case.

So in my books 3d secure is still costing us somewhere between 2 and 5% of transactions.

Mike

[cbarling]

As with all things it takes time to settle in, just a shame the banks / credit card companies handled it in such a bad way. a bit of literature instead of the tons of junk mail would probably of made a big difference.

One of the panellists quoted some expert on authentication who had said something like "As an authentication system, 3D Secure is almost as badly designed as it's possible to be. At the same time, 3D Secure is the most widely used authentication system in the world". Given the second part of this statement, you would have thought they would have done better with the design.

Not sure really about the percentages that get authorised with and without 3D Secure and I agree that these things can often be interprested in different ways. That's one of the reasons for starting this thread - to get some more views from the ground.

Chris

[wesleythorne]

for one since 3d secure the vast majority of failed payments are down to 3d secure problems, I can almost guarantee every customer i call after a failed payment, results in them telling me there password was not recognised, 3d secure hung or they did not trust the new page.

wes