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Table of Contents

Lead Story

A new era begins at The Green Sheet

News

Industry Update

IRN settles with FTC over telemarketing scam

Data breach forces P.F. Chang's back to 'knucklebusters'

Merchants need to eliminate the FUD

Features

How mobile gaming strategies drive revenue

Views

Stop looking for a PCI mobile standard

Gary Glover
SecurityMetrics

Should prepaid companies be regulated like banks?

Patti Murphy
ProScribes Inc.

Education

Street SmartsSM:
Are you selling or telling? - Part 1: How will you know if you don't ask?

Tom Waters and Ben Abel
Bank Associates Merchant Services

Insist on a balanced agent agreement

Alex Nouri
EFT Direct

Stand up, be brief, sit down

Jeff Fortney
Clearent LLC

Company Profile

National Transaction Corporation (NTC)

New Products

Enterprise-grade tablet

ParTech Inc.
PAR Tablet 8

Retail analytics simplified

Swipely Inc.
Summer '14

Inspiration

Decisions at the point of choice

Departments

Readers Speak

Meet the Expert

Resource Guide

Datebook

Skyscraper Ad

The Green Sheet Online Edition

July 14, 2014  •  Issue 14:07:01

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Merchants need to eliminate the FUD

A recent CardinalCommerce survey said 82 percent of e-commerce merchants who do not employ a consumer authentication solution are afraid that such solutions will scare off online shoppers. But with more and more fraud expected to migrate online in the coming years, the payments industry needs to do a better job of informing merchants why authentication in the card-not-present realm is crucial to data security.

The report, Use of Consumer Authentication in eCommerce: Annual Survey, 2014, conducted jointly with The Fraud Practice LLC, surveyed card issuers, payment gateway operators, acquirers, other merchant service providers and merchants themselves. While a majority of payment service companies employ some type of 3D Secure online authentication, and most large merchants do likewise, the rest of the merchant population, especially in North America, apparently do not.

The report said 55 percent of merchants surveyed, a majority of which are U.S.-based, do not use online authentication, noting that North America is the only world region where less than half of merchants use the technology. And the reason so many U.S. merchants eschew consumer authentication is they see it as a "sales killer," according to the report.

"The main reason appears to be fear, uncertainty and doubt (FUD) about how consumer authentication will impact sales conversion and user experience," the report said. According to the survey, 43 percent of merchant respondents are FUD-preoccupied, with 20 percent concerned about the effect of the technology on sales conversion, 13 percent worried about changing the user experience and 10 percent simply want nothing to do with consumer authentication.

Beyond the FUD concerns, "there is also a very real perception with merchants and service providers that integration is long and difficult," the report said, adding that 21 percent of merchants who do not employ authentication cited the time and/or cost of integration as the barrier.

An end to FUD

The solution to merchant adoption of some form of 3D Secure technology is education. The report said many FUD concerns are related to a "hangover effect" caused by bad experiences with previous iterations of consumer authentication. But the report provides evidence that the FUD factor can be overcome because of the "happiness factor" that authentication-using merchants express: 81 percent of merchant respondents showing satisfaction with the solutions they have employed. The report stated nearly half of merchants surveyed said authentication had no effect on sales conversion, either positive or negative; however, almost 20 percent believe it has had a positive effect on sales. The positive result seems to be related to merchants who use authentication selectively, on specific transactions rather than on all of them. Also, 59 percent of merchants overall "say the authentication program brought a decrease in chargebacks, and this is true for more than half of merchants from each geographic region," the report said.

FYI on FUD

Chandan Mukherjee, co-founder of payment consultancy and software provider PayCube Inc., is not surprised at CardinalCommerce's findings. "The adoption is very low because not many people understand it," he said, adding that online verification does retard the checkout process. However, he noted that if we had this solution "from day one on all e-commerce sites, today nobody would be complaining because people would be used to doing it."

Consumer authentication is also something that requires buy-in from issuers, acquirers and merchants. "It is a participation solution where the issuer and the acquirer have to be participating in it," Mukherjee said. "If you are an e-commerce site and you are certified with Verified by Visa [the card brand's proprietary version of 3D Secure], if the card issuer has not embraced that, then the security will not happen."

Over time, Mukherjee has changed his opinion about the importance of online authentication. He believes the increasing number and frequency of breaches is slowly eroding consumers' trust in the safety of e-commerce. "And that's not good for anybody," he said. "It's not good for the whole ecosystem. … At some point people will come back and say, 'You know what? This is too risky to do online transactions with cards.'"

Before that point is reached, businesses should improve their online defenses, and consumer authentication is central to that defense, Mukherjee said. And with the U.S. payments infrastructure in the process of transitioning to the Europay/MasterCard/Visa (EMV) chip card standard at the physical POS, fraud in the United States will sharpen its focus on the less secure online channel.

"EMV will do a lot of good in terms of card present security," Mukherjee noted. "But it does not do anything for card-not-present [environments]. … We have to go to a 3D Secure type solution."

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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