The authorities on online fraud, Cardinal Commerce, have published a great whitepaper. They are the good folks who run the Verified by Visa and Mastercard SecureCode operations for those card brands. Curbstone is certified to support both for e-commerce. Here is the beginng of what they have to say:
There is a lot of information circulating about Online Fraud – what should you believe? Here are seven secrets you should know, which might surprise you.
1. Even though your online fraud rate is very low, you really do need to worry about it.
You may not have had to worry in the past, but fraudsters are getting smarter every day, and they are looking for unprotected websites to perpetrate their fraudulent activity. As more online retailers set up Consumer Authentication and fraud tools, the fraudsters will focus on retailers who haven’t implemented these solutions, and fraud on those sites will increase. Additionally, as more US banks issue chip cards, fraudsters will have difficulty creating counterfeit cards for in-person use, so the fraud will migrate to online shopping sites, where the chip will not protect the transaction.
2. EMV/Chip cards do not prevent online fraud.
EMV chip cards prevent in-person fraud, but offer little protection for online transactions. Historically, in other regions where chip cards rolled out, like in the UK, in-person fraud rates fell, but online fraud rates soared, increasing 97% between 2004 and 2008 (according to Bank of International Settlements, Financial Fraud Action, BI Intelligence). To prevent online fraud (and increase your online sales), merchants should use a Consumer Authentication solution. This verifies that the person conducting the transaction is really the cardholder. Consumer Authentication protects online transactions just like the chips in the chip cards protect POS transactions – it verifies that cardholders are who they say they are. CardinalCommerce provides a rules-based Consumer Authentication solution that will actually increase sales, improve margins (by reducing interchange fees, shifting liability on chargebacks and reducing manual review), and enhance the consumer experience.
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