Visa and MasterCard have a huge share of the European card markets, but that popularity is attracting increasingly sophisticated online criminals and nimble competitors.
The networks' success is not lost on other international schemes such as TrustPay, Discover, JCB and PostFinance, as well as new competitors in the payment market such as PayPal and Apple Pay. This keeps the pressure on MasterCard and Visa to do more to protect their share, and thus far both networks have been proactive.
MasterCard recently improved and expanded the minimum standard for consumer protection against unauthorised transactions across the globe with one single rate, a groundbreaking promise.
Zero liability, developed in line with issuers and regulators, is a global promise to increase the minimum standard for consumer protection against unauthorised transactions, subject to any local laws that may be applicable.
MasterCard is following the trail from successful issuers in the U.S. who initially spear-headed the idea of "zero liability" to increase loyalty and usage. The competitive advantage of this scheme is clear: less liability for the cardholder will ultimately equate to higher market share for MasterCard.
In the U.S., this type of cardholder campaigning has continued despite the threat it poses to the industry, largely because the victims are merchants who live in fear of getting too many chargebacks and hesitate to confront these issues head on with their consumers or banks.
MasterCard is playing smart by marketing this concept in Europe, where it is gaining popularity despite additional competition. If it puts equal emphasis on educating merchants about ways to defend themselves, the idea of "zero liability" risks can be reduced.
Visa has also been active in defending its share. It revealed over 10 million registrants to its Visa Checkout service, with sign-ups increasing by more than 92% since the beginning of 2015.
Visa offers shoppers a simpler way to checkout online using just three easy clicks, the online payment service has partnered with fast-food giant Taco Bell, multinational consumer electronics giant Best Buy and leading retail bookseller Barnes & Noble, as well as Australian cinema chain Hoyts, and sports ticketing company Ticketek.
The momentum of the response from merchants and consumers speaks volumes about Visa’s mission to make payments easier.
The downside is that online fraudsters have not been idle.
Even though a scheme such as Visa Checkout strives for the highest levels of protection, the online criminals continue to challenge the financial safety of consumers. Despite Visa Checkout’s high level security measures, the increasing sophistication of online criminals means that fraud managers must work harder than ever before to keep consumers safe.
The benefits of chargebacks for consumers who have been defrauded are evident. Unfortunately fraudulent chargebacks and friendly fraud hit the bottom line for merchants. However, merchants should not be discouraged from implementing quicker, easier payment schemes, especially if they can mitigate the chargeback risk.
Looking forward, new initiatives that improve the payment experience, for both shoppers and merchants, are to be very much welcomed. We as an industry need though to be ever vigilant as the advances made by Visa and MasterCard and other providers are followed by increasingly sophisticated fraudsters.
Monica Eaton-Cardone is co-founder and CIO of the Dublin, Ireland-based risk mitigation company Global Risk Technologies.
