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PSD2 and Strong Customer Authentication 

SCA Overview 

Strong Customer Authentication (SCA) is payment security regulation brought forth by the European Banking Authority (EBA) , to ensure that Multi-factor authentication  is performed for card payments. EBA has made it mandatory to implement SCA as a part of the Revised Payment Services Directive (PSD2) initiative. The amendment is effective from September 14, 2019 and applies to all online transactions where the payment processor and the card Issuing Bank are from the European Economic Area (EEA) .

However, if your business is based out of Europe or has a significant customer base in the EEA, it is recommended to be SCA compliant. 3DS 2.0 would be your go-to option to comply with SCA regulations. 

Important Update:

PSD2 enforcement has been delayed by some EEA countries to allow time for SCA adoption, after evaluating of complexities involved in implementing SCA. Countries which have announced enforcement delay are UK , Germany , France , Netherlands , Belgium , Austria , Ireland , Italy , Greece , Poland , Malta , Luxembourg , Norway , Sweden  and Denmark . We will keep this list updated based on the decision taken by other EEA countries.

3-D Secure:

3-D Secure (3DS) is an additional authentication protocol implemented by the Card networks  to secure online card transactions. 3DS 2.0 authorizes card payment by collecting user-verifiable information using an authentication window. Its predecessor (3DS 1.0), was not widely adopted due to lack of mobile-friendliness and poor user experience, resulting in low approval rates for transactions.

3DS 2.0 has improved upon its predecessor (3DS 1.0) by making authentication more flexible and secure by being mobile-friendly and providing an improved user-experience. Issuing Banks which do not support 3DS 2.0 would still facilitate the user to complete authentication via 3DS 1.0, which redirects the user to a new window to collect password or OTP.

List of gateways supported in Chargebee for 3DS:

  1. Stripe
  2. Braintree
  3. Adyen
  4. Worldpay (Work in Progress)
  5. Bluesnap (Work in Progress)
  6. Paypal Pro (Work in Progress)
  7. Cybersource (Work in Progress)
  8. Paypal Express Checkout

List of gateways not supported in Chargebee for 3DS:

  1. Authorize.net
  2. Pin
  3. eWay Rapid
  4. Sage Pay
  5. Ingenico ePayments
  6. Wirecard
  7. Paymill
  8. NMI
  9. Moneris
  10. Orbital (Chase Paymentech)
  11. Bluepay
  12. Bambora
  13. Vantiv
Note

If you are impacted by PSD2 and have been using any of the unsupported gateways, contact support@chargebee.com  and we will help you migrate to one of the 3DS supported gateways.

3DS Workflows 

Frictionless flow 

Your customer's background data such as device fingerprint, IP address etc., are seamlessly collected during checkout and sent to the Issuing Bank to check if verification is required. If Issuing Bank can authenticate the customer based on the background data provided, additional verification will be exempted for the customer and the transaction goes through a normal flow.

Challenge flow 

In case the Issuing Bank denies Frictionless flow and mandates authentication , the customer would be prompted to verify via Challenge flow. The Issuing Bank will now request authentication using 3DS 2.0. 

If Challenge flow is necessary and the Issuing Bank does not support 3DS 2.0, the user would then be redirected to a new verification window (3DS 1.0).

Fallback flow 

Most of the off-session(customer is away) payments such as renewals, one-time charges, subscription trial to active upgrades etc., are Merchant Initiated Transactions(MITs), and ideally go through without additional verification using the customer's previously saved data.

However, there is still a minor possibility that the Issuing Bank may demand a customer to authenticate in certain scenarios. Since the user would not be available to authenticate, it would lead to a payment failure. Then, the customer needs to be notified about the payment failure and brought online to complete the authentication.

Information

Chargebee only facilitates 3DS with the help of Gateways. Eventually, it is upto the Issuing Bank to decide whether 3DS verification is necessary for the customer.

Checklist for SCA 

The series of steps below explain what needs to be done in Chargebee to stay SCA compliant and not lose revenue due to 3DS payment downturns. Completing this checklist incorporates 3DS support for Chargebee Hosted pages(In-app checkout, Single page checkout, Portal) and Chargebee API users.

It is important that you complete the entirety of steps mentioned in the checklist to cover all 3DS flows and thereby, letting Chargebee take care of notifying your customer about the payment failure and following up with them for payment recovery.

  1. Enable 3D Secure at your gateway

  2. Enable 3D Secure in Chargebee

  3. Enable Dunning for Online Payments

  4. Configure Dunning Emails

  5. Include Failure reason and Pay Now in Dunning Emails

Configuration:Detailed 

Complete the configuration steps below to start testing payments via 3DS flow in your Chargebee Test site,

1. Enable 3DS at your gateway 

Stripe has 3DS enabled by default for all merchants.

Braintree also has 3DS enabled by default, but only for EU merchants. If you're operating outside EU and using Braintree, contact Braintree's support to get it enabled.

Adyen has 3DS enabled by default for one-time payments. Contact Adyen's support to enable 3DS for recurring payments.

To enable 3DS for other Chargebee supported gateways, contact your gateway.

Make sure 3DS is enabled in your gateway account before enabling it in Chargebee.

2. Enable 3DS in Chargebee 

You can toggle Enable 3D Secure under Settings> Configure Chargebee> Payment gateways> {gateway you use}> Cards> Manage. 3DS can only be enabled for the supported gateways in Chargebee.

You can enable 3DS in your Chargebee Test site to extensively test out 3DS flows. When done testing, you can then enable it in your Live site and start charging customers the 3DS way.

3. Enable Dunning 

Dunning ensures the invoices of failed payments get into a retry(charge retry) and follow up(email notifications) cycle. Dunning is the prime payment recovery mechanism in Chargebee for 3DS payment failures due to authentication requirement. This way, the customer could be prompted to come online and complete the authentication.

Enable dunning to ensure that the respective customers are acknowledged when a 3DS payment failure occurs to their card.

Since 3DS authentication failure is a hard decline and needs customer intervention, Chargebee will not retry 3DS failures. Only exception is when you have set custom retry in Chargebee. Therefore for Smart retry, Chargebee will not retry if it is a 3DS payment failure. However, if you have set up custom retries, we will retry only on the last day of dunning period before the final action is taken.

4. Configure Dunning Emails 

Configure the dunning reminder email "On first payment failure", so that it can be sent as soon as a transaction fails because of 3DS authentication requirement. Further, you can configure more reminder emails and set the frequency at which they need to be sent to remind customers about the payment failure. Dunning emails for 3DS have no separate template and will hitchhike on the regular dunning emails.

Note that dunning reminder emails will be sent to your customers until the invoice is paid or until the dunning period expires.

5. Include Failure reason & Pay Now 

This is an important step to acknowledge your customers about a 3DS failure, so that, they can come back online and authenticate using Pay Now.

Clicking on the Pay Now option will redirect your customers to Chargebee's Pay Now page which lists all their unpaid invoices. They can now select the invoices and click Pay to authenticate and complete the transaction.

Email notifications v2 will show a Failure reason checkbox while you click on the template (shown in screenshot below). Make sure it is checked so that the email when sent will have the failure reason embedded in it.

"

Email notifications v1 can be embedded with the following mail merge fields, to acknowledge the customer of a 3DS failure using Failure reason code along with the Pay Now option.

  • {{customer.collect_unpaid_invoices_url}} - Pay Now for unpaid invoices

  • {{transaction.payment_failure_reason}} - Failure reason

Handling Fallback flow in Chargebee 

Off-session (customer is away) payments are Merchant Initiated Transactions and corresponding exemptions will be applied as per the regulation. However, as mentioned in the Fallback flow, a small percentage of such off-session payments might still require 3DS authentication, if the Issuing Bank mandates it.

In such cases, the payment would fail. However in Chargebee, the intended action would still be performed and the invoice would get into dunning. The customer would then be followed up via dunning emails as per the frequency configured in your dunning settings with the payment failure reason and the Pay Now option.

When the customer clicks on Pay Now, they would be taken to Chargebee's Pay Now page to select the invoices which they intend to pay. After selecting the invoices, when the customer clicks on Pay, they will be shown the 3DS verification window/pop-up to verify their identity and complete the payment.

Integrations and Impacts 

Chargebee Hosted Pages 

Chargebee Hosted Pages can handle all the flows involved in a 3DS transaction. If you are using Chargebee's In-app Checkout, Single-page Checkout or Portal then enabling 3DS for your transaction can be done in just a few simple steps as explained in our PSD2 checklist and configuration.

You can test out 3DS for Checkout using Chargebee Test gateway's 3DS test cards. If you need to test 3DS for Stripe, Braintree and Adyen gateways, you can test using their respective 3DS test cards.

Also make sure you're using one of our 3DS supported gateways. If not, drop us a note at support@chargebee.com  and we can help you with the migration.

Gateway JS and Chargebee APIs 

If you have a Gateway JS + API integration with Chargebee, this flow diagram explains how your new flow will be:

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Chargebee supports 3DS for JS integrations of Stripe, Braintree and Adyen. Take a look at our sections on Stripe.js , Braintree.js  and Adyen.js to understand the changes that needs to go into your JS integration. You can the test the gateways for 3DS flows in your Chargebee Test site using their respective 3DS test cards.

API-based Integration 

Sending raw card details to Chargebee via API is not a recommended approach for 3DS. Implementing 3DS for API based Integration is a cumbersome process and involves multiple steps on your side, this might affect your payment approval rates as well.

Gateways play the role of collecting the background information of a customer from the browser using their JS and sending it to the Issuing Bank. Apart from communicating customer's background data to the Issuing Bank, Gateways also seamlessly handle 3DS flows and hence have better approval rates. We recommend you to switch to Chargebee.js  or Gateway JS + Chargebee API integration options that we support and configure 3DS in Chargebee using those options.

For more information on this regard, please contact support@chargebee.com .

3DS Implementation in Chargebee Using Gateway JS 

Stripe.js 

If you have an existing Chargebee - Stripe.js integration, you need to update the integration with the help of our upgraded APIs  to ensure that you comply with 3DS/SCA and avoid payment failures.

To understand more about integrating Stripe Elements on your checkout and testing out the 3DS flow, refer to our tutorial  on 3DS supported Stripe.js integration.

Braintree.js 

Braintree.js' 3DS-verified nonce for new and existing stored cards can be passed to Chargebee's APIs for performing the necessary operations. Learn more about the API upgrade for Braintree.js  in our API docs.

To understand more about integrating Braintree.js on your checkout page and testing out the 3DS flow, refer to our tutorial  on 3DS supported Braintree.js integration.

Adyen.js 

We have implemented 3DS support for the latest version of Adyen.js using Chargebee.js' 3DS helper module. If you are using Adyen's CSE (Client-Side Encryption), you need to adopt the latest version of Adyen.js to avail Chargebee's 3DS helper JS.

Take a look at our 3DS helper JS implementation guide  to rewire your Adyen.js integration and accommodate 3DS.


Release Plan

Here's our tentative release plan to roll out 3DS updates in Chargebee:

FAQs 

1. Does Chargebee support Stripe's SetupIntent?

Yes, SetupIntent can be used to authorize a 3DS transaction for a new card. There will be no amount involved, and only important thing is that a customer needs to undergo verification.

2. What happens to existing cards in vault after September 14, 2019?

Cards which are already in gateway's vault will not go through 3DS verification in most cases. Gateways such as Stripe, Braintree and Adyen affirm that they would apply appropriate SCA exemptions to such cards.

3. What should I do if I face the error "Operation failed as the EU country entered in billing address by customer cannot be verified against IP address or card BIN number"?

Turn off location validation in your test site while testing 3DS, as there might be a mismatch between IP address and the card BIN.

You can find location validation under Settings> Configure Chargebee> Taxes. Click on the corresponding country and uncheck the Enable location validation checkbox.

4. How do I filter out 3DS payment failures and notify my customers to authenticate?

There are three ways to instruct customers to authenticate 3DS failed payments,

  1. By sending Dunning reminder emails with failure reason and Pay Now option, which is essentially the steps 3, 4 and 5 in the checklist.
  2. By filtering the invoices using "With 3DS Authentication Pending" filter, and sending bulk authentication email.
  3. By navigating to any invoice facing 3DS failure and using the Send authentication reminder present at the top of the page.
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5. Can I perform minimum amount 3DS authorization, to ensure that future payments go through without requiring customer intervention?

Yes, you can perform minimum amount 3DS authorization, but only while collecting new card for future payment(no immediate charge).

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