Online retail payments are booming. Ecommerce revenue in Australia is predicted to reach USD $32.3 billion by 2024 according to the U.S. Department of Commerce. Additionally, mobile payments represent 26.4% of all online transactions according to PayPal. GPayments knows a thing or two about how to promote secure, reliable and frictionless ecommerce transactions— a 3D Secure 2 fraud prevention solution.
Who needs ecommerce fraud prevention solutions?
Online payments fraud, in particular, card-not-present (CNP) fraud is a concern for:
- Cardholders concerned with protecting their privacy and digital pocketbooks.
- Payment gateways and merchants needing to reduce their financial and reputational fraud losses.
- Financial institutions incentivised by regulations and customer experience to provide a safer online shopping environment.
- Regulatory bodies concerned with the global competitiveness of their country’s ecommerce sector.
The financial losses of fraudulent activity are too great to be ignored. According to the Australian Payments Network, card fraud totalled $490.1 million from 1 July 2020 to 30 June 2021, an increase of 9.2% from FY2020. And, CNP fraud rose by 12.3% to $442 million in FY2021.
Fraud risk is everyone’s problem. And all will benefit from a keener industry focus on protecting sensitive data and advances in fraud detection software. However, those who need a fraud solution are the businesses directly affected, including: online retailers, payment gateways, issuers and acquiring banks.
When fraud prevention measures aren’t enough
Fraud protection is only part of the picture. As cybercrime increases, credit card fraud prevention is in everyone’s best interest. Thankfully, there are several solutions for online merchants, payment gateways, banks, credit card networks and cardholders to guard against fraudsters.
Here are a few broad fraud prevention measures:
- Fraud detection education that thwarts cybercriminals stealing critical data.
- Regulations aimed at detecting suspicious activity and reducing the risk of fraud such as EMVCo and PSD2.
- Advancements in data analytics like using artificial intelligence (AI) and machine learning (ML) to manage risks.
- Technological solutions that are 3D Secure 2.
Fraud management is a complex issue. Unfortunately, cyber thieves find their way around prevention measures by switching channels or tactics. For example, online fraud increased after in-person CNP fraud became more challenging with EMV chipped credit cards. Also, when suspicious activity is mismanaged (false declines) ecommerce retailers see reduced sales and profits. Furthermore, the average cost of a single chargeback can be about $144, which adds up every month.
Fraud detection and prevention is critical to ecommerce but it shouldn’t come at the expense of doing business at all.
Fight cyber fraud with a 3DS2 solution
To fight fraud all parties — merchants, payment service providers and banks — need a secure message flow. A 3DS2 solution provides strong customer authentication (SCA) but doesn’t create friction and negatively impact the customer experience. The 3DS2 protocol for authentication, benefits ecommerce in several ways, including:
- Liability shift: Issuing banks are responsible for chargebacks, instead of merchants or acquiring banks.
- Cart abandonment: Customers experience a frictionless payment experience.
- Mobile ready: Challenge screens operate within a mobile app for a unified buyer experience.
How does 3DS2 help prevent fraud?
3DS2 helps merchants, banks and credit card issuers prevent potential fraud at checkout with a coordinated layer of fraud detection. All merchants accepting major card schemes in countries following payment services directive 2 (PSD2) must abide by its SCA requirements. With this authentication framework in place, a 3DS2 fraud prevention solution can utilise analytics, AI and ML to apply PSD2 authentication or an authentication exemption automatically to any transaction.
At checkout, 3DS2 Server facilitates the flow of transaction data between the cardholder, the directory server of each card scheme and the issuing bank. With 3DS2, payment and authentication flows occur on the same route, greatly reducing inputs from the cardholder or skipping the authentication of a verified customer altogether. By not forcing a customer to authenticate, a 3DS2 solution avoids cart abandonment, improves customer experience and makes it harder for fraudsters to collect valuable data at the time of payment.
Fraud detection must find a way to determine a suspicious activity or user. For example, when a cardholder travels abroad and uses their card, this can trigger the need for greater data inputs at the time of transaction. This could mean that a cardholder may need to answer security questions to proceed, even after entering a username or passcode. When banks use risk-based authentication (RBA) measures to meet SCA protocols and protect customer data, they can create authentication exemptions for faster, more secure transactions.
Cyber fraud prevention is a global priority. In Australia, the Payments Systems Board of the Reserve Bank has far-ranging responsibility for payment system policy, including supporting a secure, reliable and competitive environment for digital payments —cards, ewallets, and account-to-account. As governmental policy and card schemes cooperate to tackle fraud prevention policy, 3DS2 solutions promote risk assessment data exchange between banks, merchants and card issuers and have successfully reduced fraud loss significantly.
Fight cyber fraud with a 3DS2 solution
A 3DS2 fraud detection solution offers a secure, frictionless flow of data and a 95% rate of approval for transactions, that means everyone wins.