3D Secure is the protocol behind 'Verified by Visa', 'Mastercard SecureCode', and modern step-up authentication on online checkouts. When a transaction is challenged, the customer is sent to their bank's authentication page (usually a one-time code via SMS or app push) before the transaction completes.
The key benefit isn't authentication — it's liability shift. When a 3DS-authenticated transaction is later disputed as fraud, the chargeback liability shifts from the merchant to the issuing bank. For high-value or high-fraud verticals, this is enormous.
The trade-off is conversion: every 3DS challenge introduces friction, and a percentage of customers will abandon. Modern 'frictionless' 3DS (3DS 2.0) only challenges suspicious transactions, keeping conversion high while still providing liability shift on the riskiest sales.