Updated: Nov 10, 2022
The good news: Payment card fraud for in-store purchases has been nearly eliminated thanks to the successful migration to contact and contactless chip (EMV) credit cards. Banks have eliminated a large part of their fraud cost.
The bad news: As more consumers are shopping online, eCommerce fraud, which is borne mostly by Retailers and Merchants, is growing fast.
The EMV chip in a payment card is of no use in preventing fraud when an e-commerce transaction is processed.
Impact of eCommerce fraud: The numbers are dramatic. eCommerce Merchants absorb at least 75% of all fraud costs, both direct and indirect such as administrative costs relating to chargebacks (1). The direct cost alone equates to approximately $5.00 per year per card used in eCommerce transactions (2). Each fraudulent transaction costs Merchants at least $75.00 in administrative costs (3).
Impact of false credit card declines: e-commerce Merchants are also hurt when legitimate transactions are falsely declined because of inferential fraud algorithms’ assumptions. It is estimated that $145 billion per year in e-commerce sales do not happen because of declines (4). The cost to Merchants and Retailers for these dropped sales is even more significant: not only in lost revenues, but also in lost future transactions with customers who are now stigmatized, disappointed, even frustrated or angry… and reaching for a different card.
How to fix this? While the stack of e-commerce anti-fraud solutions is growing, many are not only high cost, but also complex to implement. How can you choose wisely?
Airlines, Hotel Chains, Merchants and Retailers, B2B, B2C, C2C and Government organizations that conduct business online should protect themselves by requiring that the co-branded payment cards they issue, and ultimately any card they accept, have the latest available technology to combat Card-Not-Present fraud: a Dynamic Card Security Code.
Retailers, particularly those who share their logo with their card issuer (“Co-Branded Cards”), should require that their card incorporate a Dynamic Card Security Code. It is an easy solution to implement.
Among the several Dynamic Card Security Code solutions available, the one offered by Ellipse, through its industry partners, is attractive because:
It leverages the recently installed EMV infrastructure
The consumer can use her/his bank card exactly as she/he does now
The invisible electronics added to the card has no battery
The card manufacturing, personalization and fulfillment processes are unchanged
The solution is card manufacturer agnostic
The ROI for Card Issuers and Merchants is impressive. Only the fraudster loses!
Now is the time to stop e-commerce fraud and minimize false declines with a Dynamic Card Security Code.