Now's the time for merchants to bolster risk management ahead of the coming onslaught of card not present fraud.
According to Aite Group research, CNP fraud is expected to more than double from $2.8 billion to more than $6.3 billion by 2018. In order to counter this criminal assault, the best fraud prevention strategy will be a multifaceted operation that enables a merchant to manage multiple anti-fraud tools in real-time. Each merchant action should be based on analytics provided by fluid data points and back-end feedback loops.
The strategy may sound complicated, but with the right tools, the fraud prevention process can be optimized to save time and money. Ideally, CNP fraud should be detected and prevented before the transaction becomes a chargeback. These tools can include:
Risk Based 3D Secure Authentication. Risk Based 3D Secure Authentication can seamlessly authenticate cardholder identities while assessing transaction risk. This authentication is provided through either Verified by Visa or MasterCard SecureCode to help support a smooth customer checkout experience as well as a safe secure transaction for the merchant.
Dynamic authentication allows merchants to have greater control over 3D Secure implementation enables merchants to decide which transactions should receive greater scrutiny. Additionally, Risk Based 3D Secure Authentication allows issuers to assess the risk of each transaction based on analysis of the transaction characteristics. Heightened authentication can be implemented only on transactions designated as high risk.
Risk Based 3D Secure Authentication is an excellent defense against fraud in real time. A well-calibrated 3D Secure operation can thwart high risk transactions saving the merchant from losing the cost of goods and services.
Device Fingerprinting. Device fingerprinting takes a deeper look at the transacting device by conducting deep packet inspections, proxy piercing and reputation scoring. Criminals who try to thwart cookies and other digital identifiers can be are routinely thwarted through digital and device fingerprinting.
Post Billing Chargeback Notifications . It’s time to reassess the way in which we handle chargebacks. More than fifty percent of cardholders avoid contacting the merchant when disputing a charge and instead report directly to their issuing bank. The merchant learns of the dispute too late – often once the chargeback has been implemented. As a result, merchants must foot the total cost of the chargeback including a refund of the sale, lost product, fees and employee time and effort. It is – in my opinion – the largest obstacle faced by the industry.
Today it’s possible for a post billing chargeback notification platform to process hundreds of thousands of cases monthly and to enable almost near real-time collaboration for both fraud and non-fraud chargeback disputes. By integrating directly with card issuers and redirecting disputes from the issuer to the merchant for resolution, disputes can be resolved before they escalate and become chargebacks. In this scenario, everybody wins; merchants avoid costly fees, fines or penalties while Issuers experience lower operating expenses while supporting cardholder satisfaction through timely resolution.
The best defense against the oncoming onslaught of CNP fraud will be a multifaceted offense that identifies fraudsters without turning away valid customers. A layered and balanced approach that implements network security measures like Enhanced 3D Secure as well as unique tools that can be tailored to each merchant’s specific fraud and risk preferences will ultimately reduce losses and streamline the dispute resolution process.
Matthew Katz is CEO of Verifi.
