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CHARACTERISTICS OF A SUCCESSFUL PAYMENT METHOD: SECURITY
This puts merchants in a difficult position, because they are often concerned about making sales and focused on giving the consumers a good experience. That being said, merchants having the right data allows them to better assess if the questionable transaction or chargeback request is legitimate. Without customers’ wider spending habits, merchants are dependent on their internal purchase history, which can vary depending on the type of merchant (i.e., a customer may have more frequent purchases at a grocery store compared to an electronic retailer). However, card networks are bridging the gap and assisting merchants in disputing customers’ uncertain chargeback requests with programs like Visa’s Compelling Evidence and Mastercard’s First-Party Trust. These programs allow merchants to provide historical data to the networks that potentially prove the cardholder did authorize the disputed transaction and allow the transaction to be settled instead of processing the chargeback. 26, 27 Refund/Policy Abuse Refund/policy abuse can present itself in various ways including false claims of goods not received, returns of used or damaged goods, and returns of incorrect items to name a few. 28 In a similar manner to first-party misuse, there has been a cultural shift in the relationship between merchants and consumers. Refunds are expected from merchants, no questions asked for the most part. In a situation where a customer reports never receiving an item or it being damaged, the consequences of merchant (i.e., a customer may have more frequent purchases at a grocery store compared to an electronic retailer). if the customer is telling the truth and the merchant refusing to resend the item or refund the money may outweigh the costs of doing so.
“Merchants have seen it all, from salami being returned in place of the original good and sweating through the box at a warehouse to fraudsters returning the appropriate item but stealing identifiable credentials and applying them to counterfeit goods.”
JUSTIN STASKIEWICZ | DIRECTOR OF CONSULTING, FRAUD SOLUTIONS, CMSPI
Account Takeover As can be gathered from the name, account takeover involves a fraudster stealing card credentials via phishing, social engineering or purchasing them online, and making fraudulent transactions. This can include either bank accounts or customer account takeovers. When it comes to the latter, merchants want to create a seamless experience for their customers, but often this involves login credentials that may be compromised given the propensity to use the same password for various accounts. 29 Merchants may step up authentication during the checkout process if customer account takeover is suspected, but many will seek to limit unnecessary customer friction so this is often reserved for only high-risk transactions. For example, a new shipping address could raise a red flag, and the merchant may prompt a user to re-enter some attributes of the card on file, such as the full PAN, CVV code, and/or the expiry date to ensure the transaction is not fraudulent. The recent increased use of passkeys could be a solution to reduce fraud via account takeovers. According to a survey conducted by FIDO Alliance, most consumers believe passkeys are more secure and convenient than passwords. 30
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