If e-commerce had seven dirty words, chargeback (a demand by a credit-card provider for a retailer to make good the loss on a fraudulent or disputed transaction) would definitely be one of them. A chargeback is what happens when a credit card customer disputes a and your e-commerce store is forced to refund the transaction.
In cases of fraud, this means you could wind up repaying the amount of the disputed transaction—in addition to related shipping costs and chargeback fines—as well as losing your merchandise to the fraudster. It’s enough to make any merchant reconsider accepting credit cards in the first place. This is why Verified by Visa, and MasterCard SecureCode were created to prevent e-commerce chargebacks.
Chargeback Types
The two most commonly encountered chargebacks stem from instances of Fraudulent Transaction claims and Cardholder Does Not Recognize Transaction complaints. Very simple for consumers to initiate, a cardholder can easily open a claim online, and you will be required to defend the charge—or forfeit the revenue.
Secured Payment Authentication
Verified by Visa (VbV) and MasterCard SecureCode (3DS) require a customer to provide a personal identification number (PIN) in addition to the card number, expiration date, and security code when conducting a transaction.
Known as 3-D Secure systems, their PINs serve as the customer’s digital signature. It’s very difficult for perpetrators of fraud to conduct transactions using pilfered card numbers with this added layer of authentication in place. So much so, if a claim is filed against a 3-D Secure transaction, the card companies shift the burden of proof from the merchant to the bank that issued the card.
In an environment in which 51 percent of people with internet access choose to avoid engaging in online transactions due to privacy and security concerns, next to conducting a careful e-commerce solutions comparison before setting up your store, this can be one of the most important choices you can make for your store.
Protections Afforded
Merchants get the following protections when VbV and 3DS protocols are in place.
· Guaranteed payment of full authentications when a PIN is entered
· Guaranteed payment on attempted authentications when a cardholder is not enrolled on all domestic Visa transactions and all international MasterCard transactions
· Liability is shifted from a secure payment merchant to the cardholder’s issuing bank in instances of fraud
· Heavily reduced fraud-screening costs
Other Key Benefits
Over 75 percent of online transactions are protected from fraudulent chargebacks and guaranteed for payment with 3-D Secure Payment Authentication in place. Further, consumers have proven more confident shopping on Verified by VISA, and MasterCard SecureCode enabled sites. The average dollar value of a Verified by VISA transaction is $173, which is more than triple the $56 standard online VISA transaction.
The Downsides
However, some merchants have found consumers will abandon shopping carts when confronted with the additional step of entering a PIN to complete their purchase. While this seems counter-intuitive, keep in mind any obstacle placed in the path of an e-commerce consumer at checkout can make them decide to abort the transaction—even one designed to ensure the security of their personal data.
To avoid this, offering alternative methods of payment such as PayPal can stave off a sudden spike in abandonment after instituting the protocols. While you will incur more in fees, the logic is it’s better to make the sale and pay more than not make the sale at all.
Another strategy to overcome this reticence is to give your frequent shoppers a pass when it comes to deploying Verified by Visa and MasterCard SecureCode to prevent e-commerce chargebacks. After all, returning shoppers tend to be less likely to engage in fraudulent transactions.
Either way, these 3-D Secure Systems have proven to be a very useful tool.
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