When consumers rushed into online shopping at the beginning of the pandemic, fraudsters were not far behind. In particular, the accelerated growth of eCommerce and related digital transactions such as curbside pickup and grocery delivery has spurred a corresponding explosion of card-not-present (CNP) fraud.
The problem is, as issuers moved to eliminate that fraud, they were also generating a lot of false declines — meaning good customers were being blocked due to heightened fears that fraud might be happening.
“In this type of tough environment, merchants are really looking for a solution that can help them improve their authorization rate while also reducing fraud,” Yueming Wang, director of North America risk products at Visa, told PYMNTS.
Enabling Real-Time Data Collaboration
Merchants have found that the latest version of the ‘Three Domain Server,” or EMV 3-D Secure (3DS) authentication, is a particularly effective tool. As a result, Visa has seen more than two billion EMV 3DS authentication transactions globally since the start of 2021.
3DS gathers the digital identity elements a consumer has when they are transacting online, as well as more information about that checkout process. This information then enhances the risk scores of transactions. When a transaction is identified as low risk, the consumer is not prompted to provide any additional information. For higher-risk transactions, seamless steps are taken for additional verification to prevent third-party fraud.
“3DS enables real-time data collaboration between merchants and issuers,” Wang said. “With that information, we can have a shared understanding of the consumer.”
Reducing Fraud by 35%
For example, when a shopper is transacting on a website for the first time, that merchant doesn’t have any additional information about the shopper. In that case, 3DS providers like CardinalCommerce, a Visa solution, processes billions of authentication requests globally from all networks, and uses artificial intelligence (AI) and machine learning (ML) algorithms to provide actionable insights for both the merchant and the issuer.
“If a device is all of a sudden transacting out of normal, and we’re seeing spikes in activity, Cardinal is able to identify that as an anomaly and [can] send that information over to the issuer so they would know what to do with it,” Wang said. “The issuer can decide to prompt the consumer for additional verification — or, on high-suspect fraud situations, just decline the transaction.”
As a result, in the U.S., EMV 3DS transactions have 35% lower fraud rates compared to other forms of eCommerce transactions, she noted.
Delivering Higher Approval Rates
In other parts of the world, the adoption and scaling of 3DS has been helped by regulation. In the U.S., it’s been driven by the value of the product and what it delivers to stakeholders.
“It’s a simple, secure and seamless way to conduct authentication for merchants,” Wang said. “We see that for EMV 3DS transactions, there is an average of 110 basis points of approval lift compared to the unauthenticated eCommerce transactions, which is huge.”
Creating Simple, Streamlined Experiences
In 2022, Visa will continue to work closely with merchants, issuers and partners to enhance the data sharing process and deliver insights. With merchants, the company will continue to explore more optimal ways for merchants to capture and share data. With issuers, Visa will focus on best practices to make use of all the data issuers receive, leveraging it to create seamless experiences and reduce false declines.
“The more we can do to create these simple, streamlined experiences by partnering collaboratively across the ecosystem, the more success we will have at both eliminating fraud and creating superior shopping experiences for the consumer,” Wang said. “At the end of the day, that definitely matters.”