Visa has another great idea for fraud prevention. Two great ideas, in fact. Idea number one is magnetic stripe technology to create unique digital fingerprints for cards. Idea number two is a challenge-response technique at the point of sale. Does anybody see a pattern here?
I’ve written about the results of the Chip and PIN technology as recently as last week. It was designed to prevent fraud in Card Present transactions and it’s done such a good job that Card Not Present fraud has sky-rocketed.
Now Visa is taking two more shots at Card Present transaction fraud. For the uninitiated readers, here’s what’s up with that. Fraud losses from Card Present transactions are losses to the payment processing industry, primarily the card issuing banks. Fraud losses from the Card Not Present transactions of the Internet, mail and telephone orders, are eaten by the merchants who are also forced to pay fines for accepting the fraudulent transactions.
Understand, I have no problem with any fraud prevention efforts; we need all we can get. I do have a problem with the industry’s total disregard for the E-commerce merchants. The credit card companies (Associations, for the gentleman that insists I should use the right terms) have a revenue stream from CNP fraud and, consequently, a financial disincentive to prevent it. They do everything they can to make sure the bad guys use CNP so the Association can keep collecting fines from e-commerce merchants.
Visa pilots new payment card security initiatives – Computerworld
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Tom, I agree,fraud prevention efforts are necessary, but they should also be aimed at protecting all those involved (ie: brick and mortar stores, e-commerce merchants, and card holders). As you said so well, I don’t see the credit card companies (I see this word as more accurate than associations, as these companies are profit driven entities, not some sort of non-profit organization.)changing too many profit generating operandi. That would dip into the profit margins too deeply. I also don’t see these companies finding any better ROI than they do from the excessive fees, penalties, fines, and rate hikes (all of which are documented online, television, and printed news), no, what I see is they will continue to find new layers of generating revenue in the existing customer base, and the merchants that deal with them. Sad to say, as long as lobbyists remain on capital hill, and politicians get paid, we will see no real assistance for e-commerce against credit card fraud.
They don’t charge “Fines” to merchants who are victims of fraud and chargebacks, they charge “FEES”. That way if the chargeback is reversed, the FEE stands, since, after all, it was a service provided to the merchant! Also, if a reversed chargeback is reinstated, well, another fee is assessed. You gotta give ‘em their due: the banks know how to make money, as long as they stay out of mortgage backed securities.
@Doug
That’s a good point. Either way you look at it, there’s a good revenue stream in chargebacks. I don’t have current numbers, but back in 2000 when I was doing the initial research to start Merchant911, the payment industry’s own numbers revealed a USD $550 million in chargeback fees alone. They don’t publish those numbers any more.