3D Secure Payment Authentication Market – Global Industry Size, Share, Trends, Opportunity, and Forecast Segmented By Component (Merchant Plug-in, Access Control Server), By Application (Merchants & Payment Gateway, Banks), By Region, By Competition 2018-2028

Market Overview

Global 3D Secure Payment Authentication Market was valued at USD 1.08 Billion in 2022 and is anticipated to project robust growth in the forecast period with a CAGR of 11.20% through 2028. One of the primary drivers of the 3D Secure Payment Authentication market is the explosive growth of e-commerce and digital payments. The growth of the industry can be credited to the rise in fraudulent online activities, such as unauthorized card use and identity fraud. For instance, in December 2021, according to a report titled Authenticating Identities In The Digital Economy published by PYMNTS.com, 10% of surveyed consumers in the U.S. reported an incident of fraud involving their credit or debit card accounts. While the aggregate percentages of impacted customers may appear low but taken in context with the Federal Trade Commission, which reported 45% of reports in the U.S. in 2021 for money lost to social media scams were about online shopping. 3D secure payment authentication provides clients benefits, such as minimizing the risk of card payment fraud by assuring that customers are utilizing the appropriate card details, thereby providing a safe authentication step before customers can shop online. Furthermore, the widespread implementation of 3D secure payment authentication in e-commerce platforms is expected to drive the industry over the forecast period. In addition, online fraudulent activities are increasing due to a rise in e-commerce and online shopping trends. Thus, a rise in such trends is anticipated to create an opportunity and demand for the market over the forecast period. Technological advancements in the areas of payment authentication technology have led to a highly competitive market as the population is getting attracted toward digital technologies. The increasing adoption of digital technologies for making payments is resulting in the rise in the implementation of authentication technologies. The development of such a mechanism is attracting a significant share of end-users, which is fueling the growth of the industry. For instance, in the Czech Republic in 2019, the acceptance for 3D secure authentication is 81% and almost 76% of online payments are made using cards.

Key Market Drivers

Growing Launches of 3d Secure Payment Authentication Solutions

The growing launches of 3D secure payment authentication solutions in the market are further anticipated to drive the growth of the industry over the forecast period. For instance, in August 2020, Marqeta Inc. announced the launch of a 3D Secure (3DS) solution. With this launch, the company aimed at providing a flexible solution for issuers to create tailored cardholder authentication experiences helping them reduce online fraud. Furthermore, the growing partnerships and collaborations between the market players and the technology companies also bode well for the industry's growth. Though the market is expected to grow over the forecast period, some challenges are anticipated to restrain its growth.

For instance, when the 3D secure payment was introduced, the satisfaction of merchants and customers was low owing to the obtrusive and slow process. This, in turn, irritated merchants as they were losing sales owing to the extra steps required to follow while processing the e-commerce transactions. Thus, to resolve such issues and gain market share, 3D Secure 2.0 was introduced by card issuers. However, as payment systems become more autonomous, there is a larger need for standardization and automation across intrabank and interbank networks between nations. As a result, it is expected that the adoption of 3D secure payment authentication services would be constrained. The digital economy and e-commerce are becoming increasingly important in attempts to fulfill the Sustainable Development Goals (SDGs), presenting new possibilities as well as new challenges. The pandemic has caused a shift in how merchants interact with customers and carry out their tasks, which has had an immediate impact on the e-commerce business. Number of online payment frauds in the e-commerce industry are growing as the number of online sales are increasing. Additionally, in order to help e-commerce companies and merchants better safeguard their assets from online frauds, key players are launching 3-D Secure (3DS) online payment solutions. For instance: In February 2021, Entrust Corporation, a payment and safety services provider, partnered with Netcetera to assist financial institutions in combating card-not-present (CNP) transaction fraud.

Rise in Number of Payment Frauds during Pandemic Led to Exponential Growth of Market

COVID-19 disrupted every aspect of the e-commerce industry and resulted in high spike fraud scams experienced by consumers and businesses such as payment and card frauds, malicious activities, among others. As per the Federal Trade Commission (FTC) report, consumers in the U.S. had lost around USD 246.0 million in 2020, as a result of online shopping frauds. Merchants have been moving their focus from in-store to online settings owing to COVID-19.According to FIS’ Fraud Sight data, there has been a 78% increase in card-not-present activities during March to April 2020. Likewise, FIS PACE survey indicates that 40% of the U.S. consumers are likely to shop from online applications and carry out payment during browsers and applications. To mitigate such frauds, all online payment services firms operating in Europe were forced to incorporate 3DS2 into their checkouts by the end of 2020. Card issuers automatically refused card payments that were not authenticated by 3DS2 starting in January 2021. This resulted in an upshift in the adoption of 3DS2 standard among companies and payment service companies.

Growing Adoption of Secure Payment Platforms in Hotel Industry is contributing towards the Growth of Market Share

Hotels and restaurants have been fast to adopt new technologies, such as computerized table service and app-based ordering. There is now a plethora of mobile platforms that make ordering and paying easier for customers, with a variety of payment methods. Most hotels, resorts, and tourism centers now accept online transactions and payments for things such as room reservations and other services. During the course of a reservation transaction, online fraud can occur. With the integration of PSD2 standard, hoteliers and restaurants will necessitate forced authentication or Strong Customer Authentication (SCA) requiring two-factor authentication (2FA) to be precise and secure while carrying out online payments. This updated version adds frictionless authentication, which reduces cardholder frustrations while making a card purchase while simultaneously decreasing fraud and increasing the security of online transactions. By integrating the challenge into the checkout flow rather than sending the cardholder to extra authentication pages, 3D Secure 2 optimizes the authentication flow and allows hoteliers to conduct large transactions efficiently. This is likely to boost the 3D secure pay authentication growth in the near future.

Rising Number of Online Fraudulent Activities to Increase Implementation of 3D Secure Pay Authentication

With developing payment methods, increased e-commerce use, improved broadband access, and the introduction of new technologies, and e cashless payment system is growing at an exponential rate. Digital payment transactions have increased by 104% in 2021, as compared to the year before, according to Razorpay. Reserve Bank of India (RBI) stated that India's digital payments sector is expected to reach USD 700 billion by 2022.In recent years, digital channels have revolutionized every aspect of companies, from social media to dating applications to food delivery, alternative transportation, and holiday rentals. The usage of mobile applications has increased even further this year as a result of country-wide quarantines, with people purchasing everything from groceries to vehicles through online applications. These factors are expected to result in significant 3D secure pay authentication market growth during the forecast period

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Key Market Challenges

Lack of Global Standards and Cross-Border Payments to Hinder Market Growth

Over the past few decades, a number of governments and nationalized banks have developed low- and high-value payment systems that are based on security standards and proprietary communication. However, as payment systems develop independently, there is a growing need for automation and standardization within national intra-bank and inter-bank networks. As a result, human data collection and correction is frequently required, which is expected to limit the use of 3D secure services. Major corporations and banks with subsidiaries and branches can move funds to destination nations through intra-bank transactions. Beneficiaries are credited immediately into their foreign operation account, or payments are delivered to their banks via national clearing and settlement procedures or bilateral transfers. Thus, availability of alternate options is likely to hamper the adoption of 3D secure pay authentication solutions.

Key Market Trends

Security Concerns and Fraud Prevention

Security concerns have become paramount in the digital age. Online payment fraud, such as card-not-present (CNP) fraud and account takeovers, has become a significant challenge for both consumers and businesses. 3D Secure authentication protocols, like 3D Secure 2.0, offer advanced security measures to mitigate these risks, thus driving their adoption. Various regulations and mandates, such as the Revised Payment Services Directive (PSD2) in Europe, have forced businesses to implement strong customer authentication (SCA) for online transactions. This regulatory pressure has led to an increased adoption of 3D Secure solutions, which comply with these requirements.

Enhanced User Experience

Historically, 3D Secure authentication was criticized for adding friction to the online shopping process. However, modern iterations like 3D Secure 2.0 prioritize a seamless and user-friendly experience. This enhanced user experience has contributed to higher adoption rates as consumers are less likely to abandon their transactions due to authentication hurdles.

Mobile Payments Growth

The proliferation of smartphones has also fueled the growth of mobile payments. Consumers are increasingly using mobile wallets and payment apps for their convenience. 3D Secure authentication solutions have adapted to this trend, offering mobile-friendly authentication methods like biometrics and one-time passwords (OTP) to ensure secure mobile transactions. The widespread use of payment cards, including credit and debit cards, continues to drive the adoption of 3D Secure authentication. These cards are often used for online and mobile transactions, making it crucial to secure these payment methods. Cross-border e-commerce has witnessed remarkable growth, with consumers shopping from international websites. This trend necessitates robust payment authentication solutions that can work seamlessly across borders, adhering to various regulations and security standards. Collaboration among payment industry stakeholders, including card networks, payment processors, and merchants, has played a vital role in driving the adoption of 3D Secure authentication. These stakeholders have worked together to create interoperable and secure authentication standards.

Tokenization Technology

Tokenization technology, which replaces sensitive payment card data with unique tokens, has become an integral part of secure online payments. 3D Secure solutions often leverage tokenization to enhance security and protect cardholder data. The use of biometrics such as fingerprint recognition, facial recognition, and voice recognition has gained popularity in the authentication space. 3D Secure authentication solutions have incorporated these advanced methods, making transactions more secure and convenient for users.

Artificial Intelligence and Machine Learning

AI and machine learning algorithms have revolutionized fraud detection and prevention. 3D Secure authentication systems are increasingly utilizing these technologies to analyze transaction data in real-time and identify suspicious activities, enhancing security while reducing false positives. For businesses, building trust with their customers is crucial. Implementing robust authentication solutions like 3D Secure helps in establishing trust by protecting customers' financial information and reducing the risk of fraud. A strong brand reputation is essential for customer loyalty and business success. The payment industry is characterized by constant innovation. New payment methods, technologies, and business models emerge regularly. 3D Secure authentication solutions must adapt to these innovations to remain relevant and effective, further driving market growth.In conclusion, the 3D Secure Payment Authentication market is experiencing robust growth due to various interconnected drivers. These include the rapid expansion of e-commerce, security concerns and fraud prevention needs, regulatory mandates, improved user experiences, the rise of mobile payments, and the collaboration within the payment industry. Additionally, advanced authentication methods, such as biometrics and tokenization, along with the integration of AI and machine learning, have enhanced the effectiveness of 3D Secure solutions. As the payment landscape continues to evolve, 3D Secure Payment Authentication is poised to play a vital role in securing online and mobile transactions, contributing to the growth and stability of the digital payment ecosystem.

Segmental Insights

Components Insights

The merchant plug-in segment dominated the industry in 2022 and accounted for the largest share of more than 35 % of the global revenue. Merchant plug-in is one of the most important elements that performs 3D secure pay authentication and verification of credit and debit cards, thereby expected to grow over the forecast period. The growth of the merchant plug-in segment can be attributed to the increasing adoption and introduction of merchant plug-ins in the offerings by various companies. For instance, Payments Pty. Ltd. offers a 3D secure merchant plug-in under its Active Merchant offering. Total System Services LLC also provides Payment Gateway & Merchant Plug-In as a solution to acquirers.

The access control server segment is anticipated to witness the fastest growth over the forecast period. The access control server is utilized by issuing banks to process cardholder authentication requirements. The growth of the access control segment can be projected due to the factors, such as a rise in the need for identity verification while processing digital transactions owing to a rise in identity fraud. Furthermore, the access control server software module adds an extra level of security to credit card transactions by enabling cardholders to validate their identity using a personally determined password. The solution is offered by several companies including Asia Pay Technology, Worldline, and GPayments Pty. Ltd. among others.

Application Insights

The banks segment reported the largest revenue share of more than 60% in 2022. The segment’s growth can be attributed to the increasing digitalization across the banking industry. In September 2022, Bankrate, LLC mentioned that around 65.3% of the U.S. population uses digital banking services. Thus, the higher the use of digital banking and online card transactions, the greater the need for fraud prevention in the banking sector. Furthermore, 3D secure payment authentication enables banks to view customers’ transaction history, and behavioural history and provides information about the users’ devices. The aforementioned factors are expected to fuel segment growth over the forecast period.

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Regional Insights

North America dominated the global industry in 2021 and accounted for the largest revenue share of more than 30%. The growth can be attributed to a rise in Card Not Present (CNP) frauds across North America. Merchants across the U.S. and Canada are increasingly adopting 3D secure payment authentication to prevent CNP fraud. For instance, according to the Paypers BV, around 37% of all CNP transactions in America were protected by 3DS, up from just 10% in Q3 2020. Furthermore, the dominance of the market players offering 3DS solutions across the region is also a major factor responsible for the region’s growth.

Recent Developments

February 2023 – The 3D Secure 2.0 SDK, which provides a full native checkout and a superior customer experience for all card transactions, was released by PayU, an India-based online payments solution provider. PayU and Wibmo, a full-stack global PayTech company owned by PayU, collaborated on the development of this EMVCo-certified offering.

November 2022 – In collaboration with Mastercard, Network International released its new 3D Secure authentication system. As a result of this partnership, merchants in the UAE were able to use the N-Genius online payment gateway and Mastercard's Smart Interface for authentication

November 2022 – Bank Negara Indonesia (BNI) and UnionPay International (UPI) entered into a collaboration agreement, wherein, all BNI merchant customers were able to use the UnionPay Mobile QuickPass service and accept UnionPay card payments. This coordinated effort with UnionPay is expected to augment the network for UnionPay in Indonesia, giving convenient digital payment services to both consumers and merchants.

November 2022 – JCB Co., Ltd., joined forces with Nuvei to enable JCB payment acceptance across worldwide business sectors. This partnership provided JCB cardholders with a seamless online payment experience and increase the value of Nuvei's 50,000 merchant network. Nuvei aims to provide J/Secure(TM) 2.0, JCB's cardmember authentication program, which complies with Core Functions Specification and the EMV(R) 3-D Secure Protocol, in order to combat fraud.

March 2022 – AsiaPay Technology announced the availability of the 3D secure solution Xecure3D, which is compatible with EMV 3-D Secure 2.0. The Xecure3D arrangement increments security for cardholders on executing Visa installments, to a great extent.

Key Market Players

• GPayments Pty Ltd.
• Broadcom
• Mastercard
• RSA Security LLC
• Modirum
• Visa Inc
• Bluefin Payment Systems LLC
• Decta
• American Express Company
• JCB Co., Ltd.

Report Scope:

In this report, the Global 3D Secure Payment Authentication Market has been segmented into the following categories, in addition to the industry trends which have also been detailed below:

• 3D Secure Payment Authentication Market, By Component:

o   Merchant Plug-in

o   Access Control Server

• 3D Secure Payment Authentication Market, By Application:

o   Merchants & Payment Gateway

o   Banks

• 3D Secure Payment Authentication Market, By Region:

o   North America

§  United States

§  Canada

§  Mexico

o   Asia-Pacific

§  China

§  India

§  Japan

§  South Korea

§  Indonesia

o   Europe

§  Germany

§  United Kingdom

§  France

§  Russia

§  Spain

o   South America

§  Brazil

§  Argentina

o   Middle East & Africa

§  Saudi Arabia

§  South Africa

§  Egypt

§  UAE

§  Israel

Competitive Landscape

Company Profiles: Detailed analysis of the major companies present in the Global 3D Secure Payment Authentication Market.

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Company Information

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