Last updated: 16 December 2015
Payment technologies such as 3-D secure have the potential to relieve some of the traditional challenges faced by the Brazilian e-commerce sector. In this article we will outline the current status and adoption of 3-D secure technology in Brazil.
Technology benefits and local scenario
The 3-D Secure technology was created as a protocol that would only authorize payment through debit or credit card after the authentication of entities such as the card acquirers, issuers and the payment operators, a process that could be accomplished through the input of a designed password or the validation of a determinate token. North American card brands, acquirers and banks have implemented this technology for some years, and in Brazil it was only recently that 3-D Secure initiated its rollout to banks, consumer and card brands.
Although 3-D-Secure can be implemented in both credit and debit cards, the technology has an increased focus on enabling online payment to take place through debit cards, since it allows for this type of payment method to be utilized without the security vulnerabilities that have previously deterred its adoption. Both banks, payment gateways and acquirers in Brazil who have launched and implemented 3-D Secure functionalities have foreseen the potential of enabling online payment from debit cards, mostly due to the widespread adoption of this payment method in country. Data from the Brazilian Association of Credit Card Companies and Services, or Abecs, indicates that during the first semester of 2015 over 2.8 billion transactions were handled using debit cards in Brazil, while 2.5 billion were handled through credit cards.
Debit cards may be popularly used in physical points of sale, but in Brazil this payment method remains largely ignored for e-commerce purchases. A recent report from a major Brazilian payment solutions provider indicate that only 0.1% of all e-commerce purchases in the country are handled by debit cards. The low adoption might be related to the ease of use of other methods like credit cards, as these does not require the input of special passwords or tokens, and the wider reach of boletos bancários, which are available to the segments of the population that do not have registered bank accounts.
Although 3-D Secure enabled debit cards might present additional hurdles to consumers when making online payments, there are some advantages of this payment method that should be taken into account specially by merchants. One of the main advantages of debit cards is the time required for the payment sums to reach the merchant’s accounts, which is set at single day after payment from consumer is collected, as opposed to the 30 days following payment through credit cards. Acquirers also apply lower transaction fees for debit cards when compared to credit cards, which can be translated into lower prices offered to consumers who opt for this method.
Debit cards processed along with 3-D Secure authentication also present reduced risks of chargebacks or frauds, some of the largest vulnerabilities for merchants in Brazil. They are also immune to the cyber threats that affect Boletos Bancários and have their payment approval take place instantaneously, compared to the multiple days necessary for Boletos. With the increasing availability of compatible debit cards for Brazilians, it is possible that this type of payment will become increasingly relevant for the e-commerce, along with security technologies such as 3D Secure.
Current Adoption of 3-D Secure in Brazil
For the implementation of 3-D Secure systems, many parties need to be involved and enable this technology, such as banks, gateways and merchants. Currently all major banks in Brazil issue debit and credit cards with 3-D secure functionalities, whether from global brands like Visa and Mastercard, along with the necessary authentication tools such as special tokens or password tables. Major gateways and sub-aquirers have also enabled payment authentication through 3-D Secure technologies, mostly in order to push the adoption of debit card payment by national e-commerces.
Brazilian online stores,, however, are still hesitant to adopt these security systems, which can be attributed to the reduction in conversion rates caused by the consumers having to deal with additional authentication measures and the hassle of being directed to a bank’s online environment and then back to the store page. Some of Brazil’s major e-commerces have recently allowed for the payment to take place through debit cards associated with 3-D Secure, but overall this can be considered is a trend that has yet to reach most of the online stores in the country.
Perception over 3-D Secure by Consumers
Recent reports suggest that at the current state and implementation methods, 3-D Secure presents an unappealing shopping experience to Brazilian customers. Research from a major payment solutions provider indicates that the implementation of 3-D Secure could lead to drops in conversion rates of up to 50%, while in territories such as India the same security measures could lead to an increase of over 20% in conversion rates.
The perception over the implementation of 3-D secure can be related to the common occurrence of falsely reporting a customer as a fraudulent one, which is in general can be considered a major cause for cart abandonment. In the case of international purchases, Brazilian customers are also frequently blocked out of transactions when making use of 3-D Secure enabled platforms due to their geographical location.