Delegation Exemption Engine for Payment Authentication
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Solution Overview
Problem
Card-not-present (CNP) transactions face challenges in user authentication, leading to increased user friction and potential fraud, as existing strong customer authentication (SCA) methods, such as 3DS, require additional verification steps and redirect users to unfamiliar interfaces, causing network latency and user frustration.
Innovation Solution
Implementing a system that differentiates payment instruments with whitelisted merchants as trusted beneficiaries and utilizes an exemption selection engine to identify suitable exemptions, such as the delegation exemption, which allows the payee entity to perform authentication, reducing the need for additional verification steps and shifting liability, while also customizing user interfaces to promote trusted beneficiary options.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If strong customer authentication (SCA) is implemented for card-not-present transactions, then security is improved, but user friction increases and user experience deteriorates
Solution Approach 1:
The system applies different authentication approaches based on the specific transaction context and merchant relationship. Trusted beneficiaries receive streamlined authentication while other transactions undergo full SCA verification, allowing localized optimization of user experience without compromising overall security
Solution Approach 2:
The patent segments merchants into trusted beneficiaries and non-trusted entities, and segments transactions into those requiring SCA and those exempted. This segmentation enables differential treatment where trusted merchants experience reduced friction while maintaining security for higher-risk transactions
2Reliability
If 3DS protocol with multi-factor authentication is used, then authentication confidence is improved, but network latency increases and user frustration worsens
Solution Approach 1:
The system extracts the authentication step from the payment flow for trusted beneficiaries, allowing transactions to proceed without redirecting to external 3DS authentication interfaces. This eliminates the network latency and user frustration associated with protocol-based SCA while maintaining authentication confidence through alternative verification methods
Solution Approach 2:
Authentication and trust establishment occur in advance when merchants are designated as trusted beneficiaries. This preliminary action eliminates the need for real-time SCA verification during transactions, significantly reducing network latency and improving user experience
3Object-affected harmful factors
If additional verification steps are required, then fraud prevention is improved, but user friction increases and user experience deteriorates
Solution Approach 1:
Trusted beneficiaries perform their own authentication through the payment interface without requiring additional verification steps from the issuer. The system trusts these merchants to self-verify, eliminating user friction while maintaining fraud prevention through the trusted beneficiary designation mechanism
Data Source
AI summary
Disclosed are various embodiments for determining eligibility for the delegation exemption to strong customer authentication requirements. In one embodiment, a payee entity determines that a payment transaction using a payment instrument issued by a payment issuer is eligible for a delegation exemption from an authentication challenge by the payment issuer based at least in part on a previous authentication challenge by the payment issuer being successfully completed for a previous payment transaction using the payment instrument and a returned payment history associated with the payment instrument. Subsequently, the payee entity generates an alternative authentication challenge that does not involve the payment issuer instead of the authentication challenge by the payment issuer.