Authenticating Cardholder Data Can Help Reduce Ecommerce Fraud


Digital payments in the United States have grown significantly, reaching a penetration rate of 78% in 2020, according to McKinsey’s annual digital payments consumer survey. As has been the case with many things, digital commerce in the United States has been accelerated by the pandemic and the technological innovations that make these transactions transparent and straightforward.

But the exciting growth of digital payments, which are defined as browser-based, in-app, digital wallet, or person-to-person online payments, is threatened by the parallel rise in online fraud. Last year alone, experts predicted online fraud to be a $ 20 billion problem.1 Payment fraud began to spread online when EMV technology was implemented in 2015 in the United States for in-person purchases. EMV has been so successful in reducing card fraud that it has driven payment fraudsters to transact online.

The COVID-19 pandemic further exacerbated the rise in online fraud when internet traffic increased by 60%2 and more employees have started working remotely with fewer security controls in place. With commerce, including government payments, moving faster than ever to online environments, digital card-less transactions have also increased, and many environments have become vulnerable to fraudulent activity.


As fraudsters develop sophisticated new scams such as credential stuffing (bulk payment authorization attempts to verify stolen accounts) and streaming potlucks (unauthorized sharing of streaming subscriptions). ), the most common and worrying type of online fraud is the old school. Known as friendly fraud, this is when a cardholder claims a debit is fraudulent when it was in fact a legitimate transaction.

Friendly fraud accounts for up to 75% of all chargebacks.3 This is a costly type of fraud, with businesses and government agencies losing about 84% of all chargeback disputes.4 – resulting in loss of inventory and additional processing costs. Friendly fraud is quickly becoming a major problem. Over the past three years, nearly 80% of businesses have seen an increase in friendly fraud attacks, while 68% attribute an increase in their chargeback rates to the pandemic.5


Research shows that e-commerce and digital payments in the United States grew by almost 32% in 2020,6 and the trend is only expected to continue through 2021 and beyond. Fortunately, government agencies can take advantage of the increased growth in digital payments while protecting themselves from all types of transaction fraud, including friendly fraud.

According to a recent IBM study, organizations with a formal security strategy fare better, with an almost 50% reduction in the cost of a data breach event when it occurs.7 Yet despite strong evidence of advanced security measures, only 21% of organizations have fully deployed security automation / breach orchestration platforms.8

When developing a security strategy for digital transactions, it is important that all protection tools also help reduce false denials and unnecessary friction that impedes the smooth running of transactions for online customers. This will promote a fast, easy and convenient payment experience that will satisfy citizens.


With innovations in payment technology, a government agency can fight fraud and protect cardholder data in many ways while providing citizens with seamless digital payment transactions. One of the best tools available today is EMV 3-D Secure. Improving on the old 3-D Secure (commonly known as Verified by Visa or Mastercard SecureCode, among others), the updated version offers a smoother user experience and now adapts to a wide variety of devices, including devices mobile.

EMV 3-D Secure uses 10 times more evaluation data points than the previous version, enabling risk-based authentication by the card issuing bank. After the cardholder submits their information on the merchant’s payment page, it is sent to the issuing bank, which decides whether there is adequate data to determine whether the purchase is made by the genuine one. cardholder to authenticate and then authorize the cardholder transaction.

EMV 3-D Secure also relies on enhanced frictionless security such as biometrics, which is easy for cardholders to use and means customers don’t have to remember complicated passwords. These additional security features decrease the overall risk of fraud and friendly fraud in particular, as agencies that accept strongly authenticated transactions are less vulnerable to loss from potential chargeback disputes.

Government agencies incorporating this new tool into their digital payment streams are already reporting impressive results, including 85% reduced payment times and 70% reduced cart abandonments.9 By providing customers with simple and secure online payments, EMV 3-D Secure enables agencies to better protect themselves against fraud, reduce chargeback liability, increase payment authorization rates and, ultimately. account, generate income online.

To learn more about the benefits of EMV 3-D Secure for your agency and how to proceed, read this white paper.

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