When a payment is authenticated through the 3D Secure protocol, the liability for fraudulent disputes typically shifts from the merchant to the card issuer. This means that if a customer initiates a dispute regarding a transaction that has been successfully authenticated using 3D Secure, the card issuer assumes the responsibility for resolving that dispute.
The rationale behind this liability shift is that the 3D Secure authentication process serves as a robust mechanism for confirming the identity of the cardholder during the transaction. This added layer of security is intended to protect both the merchant and the customer, ensuring that authenticated transactions are less prone to fraud. Consequently, if an authenticated transaction is later disputed as fraudulent, the card issuer, who benefits from the verification of the cardholder's identity, is held accountable.
In contrast, merchants typically bear the financial risk for fraudulent disputes when transactions occur without such authentication measures in place. The customer, while involved in the transaction, doesn’t take on liability once proper authentication processes have been followed. The payment processor, while crucial in facilitating the transaction, does not hold liability for authenticating disputes in the same way that card issuers do.
Hence, the allocation of liability in this situation emphasizes the effectiveness of 3D Secure in minimizing fraud risk for parties