Fraud and Chargeback Reduction are Top of Mind for Payments Execs


May 30, 2016

Jim Daly, Digital Transactions

Minimizing fraud is by far the top payment concern of eCommerce merchants, according to findings from the Merchant Risk Council's newly released Global Payments Survey.

Some 46% of all merchants surveyed about payments and eCommerce issues affecting them in 2015 -- 51% of MRC members and 35% of non-members -- ranked managing eCommerce fraud as their top payments-related concern. The study, conducted for the Seattle-based worldwide association of eCommerce payments and risk-control executives by Visa Inc.'s CyberSource subsidiary, polled a total of 193 merchants in December and January at companies of varying industries and sizes. Ninety-four were MRC members.

In a related finding, chargeback and fraud rates were the respondents' leading "key performance indicators" (KPIs). Concern about those rates increased to 76% of the executives mentioning them for 2015 compared with 68% in the MRC's 2014 survey.

"Fraudsters are innovative and persevering -- money is a great motivator! -- and will find new ways to defraud merchants or consumers, or find ways around existing anti-fraud/chargeback techniques, making fraud and chargeback mitigation more and more important to manage," Gill Wells, Payments and Fraud Manager at London-based dating social network Badoo Trading Ltd. and co-chair of the MRC's European Advisory Board, tells Digital Transactions News by email. "The fact that chargeback and fraud rates are becoming more prominent KPIs confirms this."

While they're concerned about fraud, only 33% of the companies polled use the card networks' 3-D Secure technology for further authenticating online buyers, even though deploying it could earn them an interchange break. Use of 3D Secure is highest in Europe because of various issuer or acquirer mandates, according to the MRC. Some 46% of German merchants use it, followed by 45% in France and 40% in the United Kingdom. But only 18% of U.S. and 14% of Canadian merchants use the technology.

Many merchants originally shunned 3D Secure because it required customers to leave the merchant's site, leading to abandoned sales. The technology has been tweaked over the years to reduce friction, and currently is undergoing retrofits by the chip card standards body EMVCo.

"Increasing adoption would mean educating merchants that 3DS does not need to be applied with a blanket approach where overall abandonment may be high," says Wells. She explains that it could be deployed in specific situations, such as a high-risk transaction where the merchant will bear fraud liability, or as part of a risk-based authentication solution.

"In these cases 3DS can add a lot of value which merchants may not be aware of," she says.

The respondents' No. 2 payments priority was "IT constraints," cited by 43% of MRC members and 25% of non-MRC members.

"IT constraints remain a challenge for many payments operations teams; they feel many CEOs don't often fully understand what their payment and fraud teams do, resulting in less-than-adequate levels of funding in their budgets," the survey report says. "These teams are continuously looking to raise internal awareness and demonstrate their positive impact on revenue and business growth strategies."

A growing number of eCommerce merchants are concerned about converting online window shoppers into buyers. Fifty-six percent of respondents listed conversion rates as a top KPI for 2015, up from 47% in 2014.

In another finding, MRC merchants supported an average of 14.5 payment types, almost twice as many as the 7.6 supported by non-members. Some 99% of 183 respondents regarding that topic accepted payment cards. Next were digital wallets, with 66% accepting; bank transfers and invoices, 49%; gift cards or vouchers, 36%; and 21% other payment types, including carrier billing.

The MRC counts as members nearly 450 firms in 20 countries.

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