Online payments have become part of your daily business. Each time a customer completes a purchase, their details need to be verified. This makes transactions easier and faster. But it also has a challenge of ensuring that payments are genuine and secure. This is where payment authentication comes in.
If you are a merchant, knowing how authentication works is important. It helps you reduce fraud and builds trust with your customers. It also improves your payment success rate.
What is Payment Authentication?
Payment authentication means checking if your customer is the real owner of the account they are using and paying with. In simple terms, it makes sure the person using the card or UPI ID is the one allowed to pay.
This step matters because fraudsters use stolen details to shop online. If there is no authentication, their payments can still go through. That leaves you open to money loss and chargebacks.
The most common method you may already be familiar with is 3D Secure (3DS). It makes your customer confirm their identity through a password or biometric.
Strong Customer Authentication (SCA)
If you do business in Europe or deal with European customers, you would have come across Strong Customer Authentication (SCA). This is part of the EU’s PSD2 regulation and is designed to make online payments more secure.
SCA requires at least two of the following three factors to confirm identity:
| Factor | Example |
| What do you know | Passwords, PINs, and security questions |
| What do you have | Smartphone, OTP via SMS, hardware token |
| Who you are | Biometric data like fingerprint or facial recognition |
By combining two factors, SCA makes it much harder for fraudsters to succeed.
Common Payment Authentication Methods
- One-Time Passcodes (OTPs): A unique code sent to your customer’s mobile or email. It is valid only for that session.
- Biometric authentication: Using fingerprints or facial recognition. Usually, within a banking app.
- Push notifications: A request sent to your customer’s registered banking app for approval.
- Hardware tokens: A device that generates temporary codes.
- Passwords or PINs: They are still used in some cases, even if they are less secure today.
Security Checks Beyond 3DS
You can make your payment process stronger by adding extra checks along with standard authentication, like:
- Address Verification System (AVS)
- Card Verification Value (CVV)
- Geolocation
These work together to reduce fraud attempts and chargebacks.
Payment Authentication vs Payment Authorisation
It is easy to create confusion between authentication and authorisation. But they are not the same.
- Authentication: It confirms the person making the payment.
- Authorisation: It shows whether the customer has enough funds or credit to complete the transaction.
If authentication fails, the payment will never move to the next stage. And that is payment authorisation. Both steps are essential to ensure safe and successful transactions.
Challenges Faced By Merchants
- Limited visibility: It can be challenging to say if a transaction failed because of authentication problems.
- Regional differences: There can be different requirements in different regions.
- Customer friction: Your customer might leave without buying if OTPs are slow. It can also happen if biometrics do not work.
You need a flexible and up-to-date approach to handle authentication because challenges keep changing.
Why Payment Authentication Matters for You
Having a strong payment authentication strategy helps you stay secure. It can help you to have:
- Protect against fraud: It helps you to stop unauthorised transactions.
- Lower chargebacks: Help reduce disputes so your business does not lose money.
- Build customer trust: Make your customers feel safe by showing them that their security comes first.
- Improve success rates: It can help you to have the right balance. This way, you can reduce false declines and increase completed payments.
Looking Ahead
Payment authentication is no longer just a compliance requirement. It is a vital part of building secure, smooth, and reliable payment journeys for your customers. You need to be ready to adapt. The methods can evolve from passkeys to secure payment confirmation.
Investing in a clear authentication strategy will help you to meet regulations and also give your customers the trust and ease they expect.
Summing Up
As a merchant, your priority is simple. Keep your payments safe while keeping the experience smooth. Payment authentication gives you the tools to achieve both. By learning the different methods and adding extra checks, you can keep your business safe. You can also stay updated on rules to protect your customers.
