Most of the banks use chip cards to reduce fraudulent transactions however this is not the case when this transactions are made online.

1. 7 Secrets of Online Fraud
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.
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.
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.
Consumer Authentication is a bargain. You might think you’ll get sticker shock when you look at a Consumer
Authentication solution, but it will quickly pay for itself with increased sales, improved margins, plus an added
benefit – an enhanced consumer experience. Usually, the savings a merchant gets from interchange reduction
covers the cost of their Consumer Authentication program. And if you are an eCommerce merchant who ships
hard goods, without a Consumer Authentication solution, your liability for chargebacks is doubled! Not only do
you have to issue a refund to the consumer, you lose the goods themselves. By using Consumer
Authentication, you benefit from liability shift, meaning that when you authenticate, the issuing financial
institution is liable for any chargebacks, not the merchant. Authenticating even a portion of your online orders
will not only qualify you for lower interchange rates on those transactions, you’ll shift the chargeback liability
away from your bottom line. (Because the amount of interchange savings usually pays for the Consumer
Authentication program, the reduction in chargebacks and liability shift will go directly to your bottom line).
With Consumer Authentication, there are fewer false positives because Consumer Authentication uses
something only the issuer and the cardholder have or know (like a smartphone, answers to security questions,
etc.) and fraudsters would not be able to complete the authentication process. And because you’ll authenticate
more valid sales, not fraudulent transactions, your sales will increase! By authenticating, stopping even a
small number of fraudulent sales will turn into a big win for your bottom line.
Fraud does not have to be a part of your online business. With a rules-based Consumer Authentication
program working with your existing fraud screening tool and eCommerce system, you can minimize online
fraud by authenticating selected consumers and transactions. The transactions that appear to be fraudulent
will be escalated for additional authentication (and in most cases, abandoned, if authentication fails because
they are fraudulent transactions). One important benefit of a rules-based Consumer Authentication solution
is that with authentication, the pool of transactions that would have gone to manual review without Consumer
Authentication is drastically reduced – by up to 50%. This saves merchants the time and manpower needed
for manual review, one of the most costly aspects of a merchant’s eCommerce process.
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2. Adding authentication steps to prevent online fraud won’t kill conversions. In the past, adding authentication
often did cause significant cart abandonment, but by using a rules-based solution, where you can set up rules for
which transactions are challenged, your trusted consumers can buy with ease. Most of the transactions you
challenge will be the high-risk, fraudulent ones, which you do not want to successfully check out! Many
transactions, based on the rules you have in place, will pass with little or no friction to the consumer, so your
process will be transparent to your trusted consumers.
Even if your company doesn’t do much business online, online fraud can become a big problem.
Protect yourself now with a risk-based solution that is easy to implement and use. Consumer Authentication solutions today
are very scalable – whether you do only a few transactions a month, or thousands (or hundreds of thousands!), you’ll
pay just for the transactions you authenticate. And you’ll get the benefits of lower interchange rates, fewer
chargebacks and less manual review, which will save your company money every single month. And as
mentioned above, as EMV chip cards come into use in the US, fraudsters will look for unprotected websites to
commit fraud. Chargebacks on just a few fraudulent transactions could adversely affect a merchant’s bottom line.
Consumer Authentication will benefit your bottom line. Combining your existing fraud tool with a rules-based
Consumer Authentication solution will not only control your fraud, it will provide more benefits than you would
receive with your fraud tool alone. Using Consumer Authentication improves your margins right off the bat, with
lower interchange rates and liability shift on chargebacks. Additionally, your sales will increase, because
perceived risky transactions can be authenticated (where without Consumer Authentication, they would be
declined). You’ll convert more sales than before. Another benefit is financial institutions are more likely to
authorize transactions that have been authenticated, resulting in more sales for your bottom line.
To learn more about how to solve your online fraud challenges, talk to CardinalCommerce today. Our patented,
award-winning rules-based Consumer Authentication solution will increase your online sales, reduce fraud and
chargebacks, and minimize manual review. With the liability shift deadline in the US approaching, Cardinal’s
Consumer Authentication will bring your business into compliance, plus offer you benefits that will grow your
business and protect your Customers’ information.
6119 Heisley Rd., Mentor, OH 44060
t. 877.352.8444 p. 440.352.8444 f. 440.352.1646
info@cardinalcommerce.com
www.cardinalcommerce.com
CardinalCommerce Corporation
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