What is a 2D Payment Gateway? Definition, Uses, Pros & Cons

A smooth, fuss-free payment experience can do wonders for your business. It:

• Simplifies the checkout process
• Reduces cart abandonment
• Ensures your customers have a top-notch experience throughout

A 2D payment gateway can help you make checkouts a lot simpler and safer. But what exactly is a 2D payment gateway? How does it benefit you? And how does it differ from a 3D payment gateway? You'll find answers to all these questions and more in this article.

A 2D payment gateway (two-dimensional) is a system that lets customers pay online using their card by entering just the card number, expiry date, and CVV. It is called 'two-dimensional' because it relies only on these two layers of information - the card details and the CVV. It doesn't need extra steps like OTPs or verifications.

2D payment gateways are more common in regions where extra verification isn't required. For example, the US, Southeast Asia, and parts of Latin America.

But a lack of extra security steps doesn't make 2D payment gateways less worthwhile. They still follow strict rules, such as PCI-DSS compliance, to protect sensitive card details. Some popular 2D payment gateways are PayPal, Stripe, PayU, and Braintree.

A 2D payment gateway without OTP is easy to use, costs less, improves conversions, accelerates payments, and helps you reach a global audience.

1. Easy to use

With a 2D payment gateway, customers only need to enter their card number, expiry date, and CVV to complete a payment. There are no extra verification steps. This makes the checkout process fast and simple.

2. Lower costs

2D payment gateways cost less to set up and have lower transaction fees than 3D options. This makes them a budget-friendly choice for businesses with limited budgets.

3. Better conversion rates

When using a 2D gateway, there are fewer steps during checkout. With less friction, customers are less likely to abandon their carts, boosting sales.

4. Faster payments

2D payment gateways process transactions quickly, meaning you get the money sooner. This helps improve cash flow and keeps operations running smoothly.

5. Global accessibility

2D payment gateways support multiple currencies. They help you reach international markets without the hassle and serve a global audience.

A 2D payment gateway lets customers make online payments quickly using their card details. Here are the steps involved in the process:

• A customer adds a product to the cart and proceeds to checkout.
• They select the 2D payment option.
• They enter their card number, expiry date, and CVV. Some gateways may also ask for their name or billing address.
• The gateway uses encryption to protect their payment information against unauthorized access during transmission.
• The gateway then sends the transaction details to the acquiring bank. The bank communicates with the customer's issuing bank to verify the payment.
• The issuing bank checks the card details, available funds, and performs fraud checks. It then sends a response through the card network.
• Based on this response, the gateway approves or declines the transaction.
• Once it is approved, you instantly get a notification.

The gateway uses security measures like CVV checks, data encryption, and PCI DSS standards to keep the customer's details safe. Even without requiring an OTP.

2D payment gateways are quick and simple to use, have global usability, are perfect for small or recurring payments, and come with lower costs. But they also have a higher fraud risk, are limited in some areas, and have regulatory limits.

Pros:

• No OTP or extra steps.
• Commonly used in places like the USA, Southeast Asia, and Latin America.
• Works well for subscriptions or small payments.
• Usually have cheaper setup and transaction fees.

Cons:

• Higher risk of unauthorized card use.
• Not widely available in India because 3D Secure is required.
• Doesn't meet Strong Customer Authentication (SCA) rules under PSD2.

When selecting a 2D payment gateway, compare your options based on regulatory compliance, fraud and chargeback protection, settlement speed, currency supported, and integration options.

1. Regulatory compliance

See if the provider is PCI DSS Level 1 certified and follows PSD2 rules. Make sure transactions go through licensed banks to meet legal requirements.

2. Fraud and chargeback protection

Look for tools that reduce fraud risk. For example, CVV checks, Address Verification System (AVS), risk scoring, and velocity checks. Providers that help with chargeback disputes can also protect your money.

3. Settlement speed and fees

Compare how fast the payments are settled - T+1, T+2, T+7, etc. Also, check details like rolling reserves, processing fees, and chargeback costs. Faster payments can help you improve cash flow, and lower fees save money.

4. Currency and country support

Make sure the gateway can handle multiple currencies, like EUR, GBP, CHF, DKK, and SEK. This will let customers make payments without the hassle of currency conversion.

5. Integration options

Choose a gateway that's simple to connect. It should have APIs, hosted payment pages, or plugins for WooCommerce, Magento, or Shopify. This helps improve checkout speed and user experience (UX).

Bonus tip: 

Stay away from gateways that:

• Don't mention PSD2 or SCA
• Charge high setup fees without offering good security
• Have unclear terms

2D payment gateways are mostly used in countries where extra verification, like OTPs, isn't required. They're common in the US, Southeast Asia, and parts of Latin America, and also popular in Canada, the UK, and Australia, where online shopping is widely common.

Even though there are some security concerns, many businesses and shoppers choose 2D gateways because they only need to enter card details. These gateways are often used for small purchases or low-risk payments.

Using a 2D payment gateway can be a bit risky because it doesn't ask for extra verification like OTPs. This is why businesses need to take a few steps to keep payments safe for both themselves and their customers.

1. PCI-DSS compliance

Pick a gateway that meets PCI-DSS standards. This helps keep card details secure and builds customer trust.

2. Fraud detection tools

Use tools like ReCAPTCHA, Honeypot, and real-time monitoring to watch for suspicious activity. They help catch fraud early and keep payments safe.

3. Be aware of chargebacks

Since 2D gateways don't use strong authentication, stolen card details can be misused. This can lead to more chargebacks and payment disputes.

4. Follow local regulations

In countries like India, using a 2D gateway may not be allowed. Make sure your gateway meets the rules of the region where you operate.

5. Maintain customer trust

Since 2D gateways are less secure, some customers may see them as risky. Ensuring security and transparency helps protect your user experience and reputation.

A 3D payment gateway (three-dimensional, with OTP/2FA) is a safer way to process online payments. It uses 3D Secure, which helps confirm if the person using the card is the actual cardholder. This includes One-Time Password (OTP) and two-factor authentication (2FA). These steps help reduce fraud and chargebacks.

When a customer buys a product, they enter their card details on your payment page. The gateway sends an OTP to their mobile or email. The payment only goes through once the customer enters the correct OTP.

3D payment gateways are common in countries where online security is important. They help businesses keep card details safe and build trust with customers.

There are two main types of 3D Secure:

1. 3D Secure 1 (3DS1)

3DS1 was introduced by Visa in 1999 and used a fixed password at checkout. It worked well on desktops but not on smartphones, which made mobile shopping difficult.

2. 3D Secure 2 (3DS2)

The newer 3DS2 works on both desktops and smartphones. It offers different ways to verify identity, like biometrics or push alerts. It can also skip extra steps for low-risk transactions and follows the Strong Customer Authentication (SCA) rules in Europe.

Using a 3D payment gateway offers several advantages like greater security, better reputation, safer cross-border transactions, and lower risk of fraud and chargebacks.

1. Higher security

When customers enter their card details, they receive an OTP on their mobile. This OTP is only valid for a few minutes. If it isn't entered correctly, the payment can't go through, which stops hackers from stealing money.

2. Better reputation

Customers know that 2D gateways carry more risks. Using a 3D gateway shows you're serious about customer security. This helps build trust and credibility with them.

3. Safe cross-border transactions

International payments can be risky because of cybercrime. 3D gateways protect both you and the customer, making payments faster and safer across borders.

4. Reduced fraud and chargebacks

Even if someone has stolen the card details, they cannot make payments. This is because the gateway needs an OTP to process transactions. This helps prevent fraud and reduces chargebacks, protecting both the customer's money and your revenue.

A 2D gateway asks for simple card details like the card number, expiry date, and CVV. On the other hand, a 3D gateway also asks for these details but adds an extra step to secure the payment. This usually involves an OTP or two-factor authentication (2FA).

Here are the key differences between the two:

Selecting between a 2D and a 3D payment gateway should depend on what your business needs. But if you're handling cross-border payments, platforms like Xflow make collecting money simple and reliable.

You can receive payments in multiple currencies, track incoming funds, and withdraw to your bank account within one business day. No hidden charges, no back-and-forth with banks.