OVC Chit Chat

Yet another credit card industry report has identified another rise in the rate of internet and telephone credit card fraud and tells us how many billions of US$ credit card fraud is costing banks every year.

Yet despite billions being lost E-commerce credit card fraud costs, can be contained by the Issuing Banks. The system 3 D-Secure, was established to protect the Issuers and the Merchants from indiscriminate fraud perpetrated by well informed E-commerce consumers and criminals alike.

The process enables the Issuer to issue a ‘digital Certificate’ to their card customers for use in E-commerce transactions, the Merchant who is processing via the 3 D-Secure method would pass the entire sales process to their Acquirer for independent completion which means the Merchant never sees the customer’s card details during the transaction.

Where the Issuing Bank has issued a ‘digital certificate’ then their customer will be asked to provide this by the Acquirer system. However, where the Issuer has not issued the ‘digital certificate’, then the responsibility for acceptance lies completely with the Issuer (i.e. under this process the Issuer does have the right to dispute a transaction with an Acquirer when it has been processed under 3D-Secure process).

The irony is, that many Issuers will not approve a transaction referred to them via 3 D-Secure as they do not want the responsibility in the event of eventual cardholder dispute.

In effect, the growth / expansion of E-commerce is it appears being hampered by the very tools implemented by Card Organisations that were designed to protect all parties.

It is generally accepted in the credit card industry that there is a higher than desired level of dishonest merchants in the cyber world! However, there are also a very great number of legitimate and honest merchants, and it is the latter that are having their E-commerce business potential impaired by the measures imposed by the Card Schemes that were designed to protect them.

Both Visa and MasterCard have very strict behavioural and monitoring standards that are imposed on Acquirer Banks in the management of their E-commerce portfolios. There are fees relating to disputed transactions, fines imposed on Acquirers when disputed transaction thresholds are exceeded and many Acquirers are forced to retain portion of Merchant sales to protect themselves against chargeback loss potential. Sadly, the industry is in a shambles with little being done to foster this obvious growth market potential. Measures imposed are reactionary at best with a bias leaning toward the protection of the cardholder / Issuer Bank.

With costs of selling goods and services via E-commerce becoming more costly and with little or no protection being provided, it is little wonder that this method of commerce is stalling.

It is time for new pro-active measures to be developed that protect all parties equally, only then will there be a sense of consumer confidence that E-commerce is backed by Credit Card Issuers and Acquirers.