2D vs 3D Payment Gateway: Understanding the Key Differences

Your customers may drop off right before completing the payment simply because they feel the process is too long. For businesses or eCommerce brands that accept online payments, this situation is pretty common. Ultimately, your checkout experience and the level of security affect your conversion rates and determine your financial risk. 

If you’re making global transactions, you must know the differences between a 2D vs 3D payment gateway.

Read on to understand how a 2D payment gateway differs from a 3D gateway and how each works, so that you can choose the one that suits your business model.

What is a 2D Payment Gateway

A 2D payment gateway does not involve any OTP. For instance, if an individual pays for a subscription and the payment goes through without OTP verification, it’s a 2D gateway. Under this mechanism, the transaction is validated only on the basis of basic card details like:

Since there is no extra step like OTP verification, the payment typically does not involve an additional authentication step with the issuing bank. The term ‘2D’ is informally used to describe transactions that do not involve an additional authentication layer like 3D Secure. It typically involves these two elements:

For instance, when you save your card on Netflix, the platform charges you on a monthly basis. It doesn't ask for OTP every time. So, that’s a 2D transaction.

The term ‘non-3DS payment’ is also used to refer to 2D gateway payment. ‘3DS’ stands for 3D Secure. It’s a protocol used in more secure transactions. 

What is a 3D Payment Gateway

Businesses often try to understand “what is 3D payment gateway” to process payments in a more secure way. Think of the last time you paid for something online, and an OTP was sent to your phone number to complete the transaction. That is actually a 3D payment gateway. 

With this type of payment gateway, a third layer of verification is included along with the basic details of the card. This additional step may be:

In a 3D gateway, the term ‘3D’ refers to the three domains that are involved in authentication. These are:

These three entities work together to validate that the actual cardholder is making the payment. While checking out, these names may appear:

All these implementations are of 3D Secure, the protocol behind 3D gateways.

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What are the differences between 2D and 3D Payment Gateway

A business that handles small recurring payments may care more about speed and fewer drop-offs. On the other hand, a business that deals with large transactions may care more about security and fraud protection.

Instead of a technical choice, businesses and retailers must choose their payment gateway based on factors like conversion rates, customer experience, and financial risk involved in the process.

Here’s a comprehensive comparison presented in tabular format that will help you gain greater clarity:

How Does a 2D Gateway Payment Work

A 2D gateway payment looks simple, but in the background, a methodical process completes it step by step.

It’s not viable for a SaaS company charging $20 per month to thousands of customers to require an OTP for every transaction. A 2D payment gateway simplifies the process. This entire process takes just a few seconds. It does not involve any OTP, identity verification, or interaction with the customer after they enter the details.

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How Does a 3D Gateway Payment Work

A 3D gateway payment works just like a 2D system at the start. However, this mechanism involves one extra step, like an OTP or biometric verification. One important aspect of a 3D payments gateway is that authentication occurs before the transaction is approved. 

In case the customer enters an incorrect OTP, the payment may not go through.

This is how it works in a step-by-step manner.

An electronics store selling high-value items may use 3D gateways to reduce the risk of fraud. Even if a person possesses the details of a stolen card, they cannot complete the transaction without an OTP.

What is the Difference Between 3D Secure 1 and 3D Secure 2

It must be noted that not all 3D payments work the same way. The protocol powering these transactions has two versions.

3D Secure 1 (3DS1)

This was the original version introduced in the early 2000s. It required a full-page redirect to the issuing bank's website. Often, static passwords or OTPs were used for payment processing. These were not optimized for mobile devices. Usually, they were slower and sometimes clunky. Many users dropped off at this stage because the pages took a lot of time to load, and the interfaces were not mobile-friendly.

3D Secure 2 (3DS2)

This is the upgraded version being used today in most transactions. It works smoothly within apps and websites. 3D Secure 2 also supports biometrics like fingerprint and face ID. Risk-based authentication is used in these systems, which means an OTP may not be required on every transaction. These gateways are friendly to mobile devices and much faster.

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What are the pros and cons of 2D & 3D payments?

How Do You Choose Between 2D and 3D Payment Gateway

The choice between 2D vs 3D payment gateway must be based on practical requirements. Here’s what businesses must consider while deciding the kind of payment gateway they must integrate:

Based on Transaction Volume

SaaS businesses with subscription models often involve low-value transactions at high volumes. These organizations may favor 2D gateways for a smoother user experience. On the contrary, organizations that involve fewer high-value transactions may benefit from the enhanced security of 3D gateways.

Based on Fraud Risk Tolerance

If a business experiences frequent chargebacks, 3D payment gateways may shift this liability to the bank. However, if instances of fraud are rare, businesses can take advantage of the speed of 2D gateways.

Based on Customer Experience Priorities

Businesses that use the subscription model and prioritize customer experience may opt for the 2D model. However, those involving one-time purchases of expensive items need 3D gateways for security purposes.

Based on Compliance Requirements

The RBI has mandated AFA in India. That’s why 3D payment gateways are essential for domestic cards. However, merchants often offer greater flexibility for international cards. Cross-border payments may use 2D gateways, depending on the regulations in the country of origin.

Simplify Cross-Border Payments with Skydo

The choice between 2D vs 3D payment gateways is not about which one is better. Businesses must evaluate both and choose the best one that suits their purpose. 

The next challenge is receiving that money, particularly when you deal with overseas customers. Things can get complicated when:

That’s where businesses find the right solution with platforms like Skydo. It simplifies how businesses receive international payments. The key benefits include:

Whether you use 2D or 3D gateways for your clients abroad, Skydo helps you collect payments globally with transparent fee details. Switch to Skydo to get faster access to your funds. Explore the platform now!