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Top of the News
Payer authentication is here: are you ready?
Visa Payer Authentication Service (VPAS) is now available, and MasterCard's Secure Payment Application will soon be. Designed to validate (authenticate) the cardholder's identity for online purchases — and thereby minimize the risk of fraud for both consumers and merchants — these services promise to remove merchants from financial liability for fraudulent purchases.
These plans also mean changes for your payment infrastructure and how your customer moves through the purchase process.
Reduced financial liability-maybe
Use of payer authentication services may remove an online merchant's financial liability for fraudulent credit card transactions (e.g. protection for RC61 and RC23 type chargebacks). Visa has signaled such change could be in effect for Visa-enabled transactions by April, 2003, as long as the merchant has requested authentication of the transaction. Some experts believe certain categories of business and/or individual merchants will remain exempt from chargeback protection due to high risk lines of business and would thus not benefit from implementing payer authentication.
Increased business-maybe
Visa believes use of payer authentication services will deliver incremental demand, as consumer confidence in the safety of online shopping will increase. A recent Jupiter Media Metrix survey revealed that 80% of consumers would be open to additional authentication measures to make online purchases more secure. Skeptics cite the additional steps required in the buying process as a potential sales deterrent.
Your customers' experience will change
Consumers will be required to register with their bank and adopt a password or electronic wallet, depending on the implementation. During the purchase process, they will either be prompted for the password (in addition to the card number) or complete the transaction using the electronic wallet. With the Visa implementation, the authentication will be facilitated via a bank-branded pop-up window during the checkout process.
If your customer uses cards from different banks and or different card brands, the purchase experience will be different with each. Depending on the effectiveness of advertising and promotion by the card brands and banks, the presence or absence of payer authentication services may influence which sites are patronized.
Plan to evolve your systems
Both of the current payer authentication services require modification of your systems to facilitate authentication. However, there is no common standard. Thus, you must carefully plan your system architecture not only to accommodate evolution of payer authentication technologies within a single card brand, but also accommodate adoption of authentication services from additional card brands as they are introduced.
Secondly, the rate of consumer and bank adoption (as either influenced or mandated by the card associations) will likely dictate that you accommodate both "authenticated" and "non-authenticated" transactions simultaneously. If your business has implemented fraud-screening measures, these must likely remain in effect for transactions involving customers who have not registered (although there may be provisions for chargeback protection if the authentication request is made, even if the cardholder is not registered) or who are using a card brand not currently providing a payer authentication service.
Get more information
For more details on payer authentication, as well as new threats to payment transaction security and what you can do about them, request your free "Executive Guide to Secure Online Payments," including the just-published report, "Secure Online Payments 2002," exclusive access to the independent Gartner Group report on credit card fraud prevention, a CD-based desktop seminar on Online Credit Card Risk Management, plus a technical report on payment security implementation. Click here for your free copy.>
Put VPAS to work now.
For purchase information regarding the CyberSource Payer Authentication Plug-in, a highly secure, thin-client that enables merchants to authenticate customers registered with the Visa Payer Authentication Service, contact sales at 1-888-330-2300.
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Case Study
CompUSA stops online fraud
When CompUSA, launched its direct Web sales channel to offer Internet shoppers hundreds of computer products, accessories and services, the company was thrilled with the high-volume of traffic to the site. The number of orders originating from its newest sales channel surpassed expectations. Unfortunately, while sales grew exponentially, so did credit card fraud.
Although CompUSA already had an experienced fraud team in place, they soon realized that the increasing order volume generated by the site would require an automated risk management solution.
"We were devoting far too much time to manually reviewing each and every order from the site. Our team quickly recognized that an automated solution would free us up to spend our time where it matters most…with the customer and converting more valid orders," said Pam Bryk, Director of eCommerce at CompUSA.
To jump on their fraud problem, CompUSA turned to CyberSource for a complete risk management system designed specifically for the Internet. The automated CyberSource solution is designed to reduce fraud-related losses and increase operating efficiency by decreasing often cumbersome manual review processes, increasing credit card fraud detection capabilities, and maximizing valid order conversion.
The Return: Fraud Down, Productivity Up - and Hundreds of Thousands of Dollars Saved
Just three months after implementing the CyberSource Risk Management solution, CompUSA has been able to greatly reduce fraud-related costs and significantly increase productivity of fraud team members. What they accomplished:
- 93% decrease in chargebacks due to fraud
- 150% increase in order conversion rate
- 131% increase in productivity
- 67% decrease in order processing time (for sales made by credit card)
- 43% increase in customer satisfaction rating
"Reduced chargeback and fraud-loss savings have reached into the hundreds of thousands of dollars and that is just the tip of the iceberg. As a result of re-aligning our fraud work-flow, we now have more time to work with customers to convert valid orders to sales, our order conversion rate is up 150 percent and customer satisfaction has increased dramatically," said Bryk.
For more information about how you can realize the benefits resulting
from CyberSource risk management solutions and expertise, visit: http://www.cybersource.com/solutions/risk_management/, or call us at 1-888-330-2300.
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| CompUSA's Risk Management Solution The solution CyberSource provided CompUSA included:- Review and analysis of current risk management work flow
- Customization and implementation of centrally controlled business interface
- Implementation of CyberSource fraud screen service
- Fine-tuning of fraud screen thresholds
- Fraud score calibration
- Set-up of internal fraud database and "hot" lists
- Complete, enterprise-wide system integration
- Realignment of personnel and automation of manual processes
- Retraining of personnel
- Creation of a fraud committee with monthly meetings to monitor and review fraud statistics
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Fraud Prevention Forum
Q: "AVS isn't available internationally — what should I use instead?"
A: Our in-house expert and Director of Risk Management Products, Jeff King, replies: While AVS (Address Verification Service) adoption is widening - it is applicable now for cards issued in the U.K., Germany, Austria and Switzerland, as well as the U.S. - it remains only a partial solution to help deter fraud wherever it is used.
A perfect AVS match does not guarantee the validity of a transaction, nor does it remove an online merchant's liability for a fraudulent one. CyberSource recommends that online merchants use a variety of tools such as CVV/CID and a fraud screen as well as their own business rules to help deter fraud.
An important first step is to continually track your chargebacks in relation to products, countries, dollar amounts, etc. to determine specific fraud trends that are occurring at your site. By doing so, you can make the necessary adjustments. One important feature of CyberSource Advanced Fraud Screen Enhanced by Visa is that it specifically tracks geographical location of the customer based on address, IP, phone, email and other factors.
The result: a strong risk analysis for all orders-U.S. and abroad. To find out more about fraud screening, click here.
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The Transaction Insider
By Doug Schwegman
Market Research Director
As the U.S. online sales channel matures and growth rates slow from the 100+% rates of the late 1990's, seasonal patterns become easier to identify. In 2001, data from the U.S. Department of Commerce indicates that the value of online sales by retailers was $32.6 billion, an increase of 19% from 2000. The Commerce Department data indicates that the October - December peak online retail sales quarter represented approximately 31% of annual online sales by retailers. This is down three points from the fourth quarter of 2000, which represented 34% of annual online sales by retailers in 2000.
Online seasonality mapping to offline
Comparing the seasonality of total retail sales as reported by the Commerce Department to online retail sales, the performance of online sales in 2001 is moving closer to the normal seasonality of retail sales. Total retail sales reported by the monthly Commerce Department survey show that the fourth calendar quarter represents 27% of total annual retail sales (in both 2000 and 2001). Excluding the sales of retailers who have a low online sales presence (restaurants, automobiles, gasoline and food), fourth quarter retail sales were 29% of total annual sales in both 2000 and 2001, which is close to the 31% of total annual online sales represented by fourth quarter online sales by retailers. Leading merchants in the CyberSource Transaction Index transacting online orders consistently throughout 2001 (i.e. same site sales) saw 34% of their online transaction order volume occur in the fourth quarter.
What's ahead
One advantage of a stable seasonality pattern is that total year sales can be projected with a higher degree of confidence after seeing one or more quarters of online sales in a current calendar year. We will look at applying this technique to estimating 2002 U.S. online sales, estimating the fourth quarter 2002 online sales outlook, current forecasts of online sales and other interesting trends we see in the U.S. Commerce Department online retail sales data and our data in future issues of this newsletter.
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Know About This?
Get a quick link count
Want a quick way to find out your website's visibility on the Internet? Use Google query "link: site URL". It will return all the pages that point to the specific URL. Example: a query of "link:www.amazon.com" returned 54,000 results. Discover how your site measures up against its competition by comparing results.
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Product Spotlight
Two new fraud prevention tools
Now, the most effective fraud scoring in the industry
CyberSource's new Advanced Fraud Screen (AFS) Enhanced by Visa is the first fraud scoring system to utilize up-to-the-minute purchase activity -- including online and in-store transaction data -- making it the most accurate fraud detection and sophisticated scoring system available today. To learn how AFS Enhanced by Visa dramatically cuts fraud rates and boosts customer satisfaction, call us at 1.888.330.2300 or find out more.
New decision management tool-Risk Manager 2.5
Now you can optimize online and contact center fraud detection by customizing your specific order acceptance criteria -- even if you use multiple risk analysis tools - all on a single platform. Thanks to the new Risk Manager 2.5, you can also build rules and modify risk management processes in real time, leveraging screening, authentication, and other key capabilities available from CyberSource and third-party providers. For a detailed description, download the Product Brief. Or call us at 1.888.330.2300 to request a copy.
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Coming Events
Hear us at:
PAYMENTS 2002 (NACHA)
April 14-17
Wyndham Anatole Hotel
Dallas
Visit us at:
Microsoft TechEd 2002
April 9-13
New Orleans
ETA Annual Conference
April 10-12
Marriott World Center
Orlando
Miva Conference III
May 8-11
Aboard the Sea Princess
Los Angeles to Vancouver
Insurance Accounting and Systems Assn. Educational Conference & Business Show
June 2-4
Moscone Convention Ctr
San Francisco
NRF Loss Prevention Conference & Exhibition & Internal Audit Executives Conference
June 2-5
Austin Convention Ctr
Austin
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