Attracting customers for the business means offering quality products or services coupled with the most suitable deals. But to thrive and win the customer, the next step is to ensure financial security coupled with convenience. 

Compromise or complications with any of either two aspects can deter the customer from buying. While poor security can even make them explore alternative options, too much convenience can lead to high fraud risk. 

To offer the top convenience with perfect security, payment authentication is an effective solution. Wondering how this is possible? Striking the right balance between convenience and protection, it allows smooth transactions and safeguards against fraud through effective measures. Here are more insights into the aspect. 

Understanding Payment Authentication 

Payment authentication refers to the identification of a customer to prevent unauthorized transactions, financial crimes, and fraud. The payment authentication is achieved through user location, knowledge, ownership, and inherence. 

Knowledge-based Authentication: Generally, the knowledge factor is used for authenticating the transaction. It relies upon the information that must only be known by the user. For instance, PIN, password, or secret question. The knowledge-based authentication factor is also referred to as Challenge-Handshake Authentication Protocol (CHAP). 

3D Secure System: While knowledge-based authentication is traditional, currently, the online payment authentication protocol in practice is the Global 3D Secure (3DS) system. It relies on biometrics, OTP, or app-based approval for additional verification. This method is a global standard for online card payments. 

Benefits of Security And Convenience in Payment Authentication

Offering both security and convenience is certain to attract customers. Here is how the businesses and enterprises get to benefit from this: 

  • Leads to fewer card abandonments, thus increasing revenue 
  • Reduces financial losses due to effective authentication and lower fraud 
  • Saves time and resources through efficient authentication mechanisms
  • Develops trust and reputation among customers, thus enhancing brand perception 
  • Offers a seamless experience to the customers to make payments 
  • Offers a competitive advantage to the companies compared to those that do not provide secure and convenient payment procedures 

How Payment Authentication Ensures Security? 

Security can be offered by payment authentication through the following measures: 

Tokenization

It replaces sensitive card details, such as card numbers of CVVs, with randomly generated tokens. Reversing the process does not yield fruitful results, offering effective security and thus preventing loss due to cybercriminals. Hence, tokenization is an effective method to protect digital transactions. 

Biometrics

It involves the use of fingerprint or facial recognition. Since these are independent of passwords or OTPs and specific to individuals, the issue of reuse or phishing is eliminated with this security measure. These can also not be enquired through fraud calls or messages, thus preventing money laundering. Further, it also adds to the convenience of users in making digital payments. 

FIDO-based Authentication

FIDO stands for Fast IDentity Online. This authentication method eliminates reliance on vulnerable OTPs. Rather, it uses device-bound cryptographic keys paired with biometric verification. The user's device stores the private key, and transactions are verified server-side with the public key. 

While it uses two-factor authentication, the process is seamless, quick, and hence convenient, which does not deter customers from making the payment. It also offers protection from phishing while enabling scalability. 

Multi-Factor Authentication (MFA)

It involves the implementation of two or more forms of identification factors. The requirement to input different details is an effective way to add layers of security against fraud and unauthorized access. The verification details to put in can be the combination of a password with a security key or other factors. 

3D Secure Authentication

3D Secure 2.x (3DS2) improves security through the analysis of over 100 data points in real-time, which includes transaction patterns, geolocation, and device ID. It can prevent fraud risk, thus lowering cart abandonment and checkout times. 

Compliance

Payment authentication involves compliance with the EU's Payment Services Directive 2 Strong Customer Authentication (PSD2 SCA). It needs at least two or three factors for authentication, which include 

  • Password/PIN
  • Device/token
  • Biometrics. 

AI-based Fraud Management

Technological advancements like the incorporation of AI and ML in payment authentication have eased and enhanced fraud analysis. It involves looking for anomalies or changes in customer behavior, spending patterns, and device fingerprints. It uses predictive analytics and real-time detection to lower false positives while blocking fraud attempts. 

What Makes Payment Authentication Convenient? 

The user convenience in payment authentication is further possible through the adoption of the following methods: 

Multiple Device Support

Modern authentication solutions allow secure transactions across different devices such as laptops, smartphones, tablets, and wearables. Customers don't have to switch devices or compromise on usability for specific purchases. The payments will remain consistent and secure regardless of which device they use for transactions. 

Simplified Checkout

It involves the incorporation of 3DS2 and FIDO to prevent pop-ups, redirects, and repetitive OTP inputs. The customers can simply opt for biometric verification, which easily confirms the identity of users. It also offers a faster and single-window checkout experience, thus offering a seamless experience. 

Recurring Payment Solutions

The recurring payment, often witnessed in subscription models, allows automation of recurring payments. It offers security in the initial setup of recurring payments through e-mandates. This verification is coupled with OTP or other additional factors and tokenization to reduce fraud. 

One-Tap / Single-Sign-On (SSO)

It is also the method of user authentication that simplifies access to different services and applications. It eliminates the need for repeated logins and management of multiple passwords by requiring a single set of credentials for access across multiple devices. It is an appropriate choice for ensuring convenience in online banking and payments. 

Conclusion 

Payment authentication is highly essential, especially in current times, where cybercrimes have become too common. It offers a perfect shield against fraud while ensuring customers enjoy smooth and convenient checkout. Security can be achieved by applying the different security methods, such as biometrics, tokenization, multi-factor authentication, and much more. 

For convenience, the multiple device support, simplified checkout, recurring payment solutions, and one tap sign-in can ease the customer journey. Hence, payment authentication can be effectively used for balancing security and convenience during online transactions.