It was a revolution when we stopped having to sign carbon paper credit card slips. Then came the fateful day we no longer had to call the credit card company for authorization. As convenient as credit card transactions have become, cardholders are understandably anxious about the possibility of fraudulent transactions being made on their accounts.
Buyers Being Wary
Payment card fraud apparently only occurs in less than 1% of all transactions made with cards, according to information from the Federal Reserve, but it is one of the top consumer concerns and has had a detrimental impact on e-commerce sales.
Card-Not-Present – or “CNP” – fraud is the dominant payment fraud type in the United States, representing 45% of the total card fraud in the country. Because merchants cannot examine a payment card for signs of fraud like a missing hologram or suspicious account number, and all the information required for the transaction could easily come from someone who has stolen the card and account information, CNP can be hard to prevent, although merchants can look out for certain warning signs.
E-Merchants Hold the Bag
Consumers are rightfully well protected when payment card fraud occurs, but this means that with fraudulent CNP transactions, the merchants are the ones who take the hit. Moreover, even if they have been reimbursed, more than 55% of cardholders who have experienced payment card fraud will react by decreasing their online shopping activities, use payment cards less, or close the accounts altogether.
When we’re dealing with online fraud, the numbers are staggering. Three years ago, the total value of fraudulent e-commerce transactions in the United States was $10 billion; in 2018, we may be looking at $19 billion. Globally, online retailers have reported nearly $60 billion in losses resulting from e-commerce fraud.
Consumers Want More Payment Card Security
Despite great online and payment card technology advances, cardholders’ security concerns are only growing. This is largely in response to some epic data security breaches, such as the hacking of Equifax early this year, resulting in unauthorized access to social security, credit card, and personal information of more than 140 million Americans.
It’s no surprise that more than 75% of online consumers are demanding more payment card protection for e-commerce, and many of them are willing to follow new processes – even change their shopping behavior – to increase information security.
What Tools Do We Have?
A lot has been written about the implementation of EMV® smart cards, but the system was designed more to reduce the risk of counterfeit fraud. EMV® won’t end database breaches, seeing as hackers and other fraudsters will simply adapt and find novel ways to steal the information.
It may seem difficult to “know your customer” when they’re not physically standing in front of you with their card, but this is the key to online fraud prevention. The best way to go about this – and to make yourself less vulnerable to fraud – is combining your payment authentication solutions, some of examples of which are:
- Kount which examines each transaction at the checkout process and assesses the risk potential of each online sale. A risk score is calculated from which users can determine whether to approve, manually review or flat out decline the transaction.
- Biometrics authentication for payment card security, which is designed to measure and analyze physical and behavioral characteristics of the cardholder for the purpose of transaction approval or declination.
- One Time Passcode, which works by producing an automatically generated string of random numbers as a way for users to confirm whether cardholders are who they claim to be, and is more secure than a static log-in.
To put it in a cheesy way, no fraud prevention tool is an island. By “multi-layering” your online fraud prevention solutions, you stand the best chance to weed out unauthorized transactions before they compromise your customers’ information security and affect your bottom line.