by. Nicole Reyes
What follows is an excerpt of the white paper “What Card Issuers Need to Know about Card-Not-Present Fraud,” which is available for download at themembersgroup.com.
For many years, issuers were somewhat able to shrug their shoulders when it came to card-not-present (CNP) fraud. That’s because most losses from fraudulent e-commerce transactions could be charged back to the merchant. Today, however, with increased merchant enrollment in 3D Secure protocol programs, such as Verified by Visa and MasterCard Secure Code, CNP chargebacks have been virtually wiped out. If a merchant participates in either of these programs and a fraudulent transaction gets through, the issuer no longer has chargeback rights.
Of course, not all merchants are on board with the 3D Secure protocol. In fact, some have coined the innovation a “conversion killer,” mainly because it can disrupt an otherwise seamless online checkout experience for consumers. Yet for every naysayer, there is a supporter. Most recently, a Dutch e-commerce processor conducted a survey to support the idea that 3D Secure can actually enhance the conversion rate among online shoppers.
Issuers are, understandably, a bit stand-offish on programs that threaten their chargeback rights. Beyond the potential to damage the bottom line of card-issuing credit unions and community banks, 3D Secure programs also have a long way to go before they are as secure as they hope to be one day. Both Visa and MasterCard have made commitments to continue to improve the program’s security and to also develop strategies that allow the protocol to offer merchant and issuers “equal rights.”continue reading »