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Online sales, telephone sales, and mail-order sales all present opportunities for fraudsters to commit Card Not Present (CNP) fraud. It’s important for merchants to recognize that this prevalent form of fraud is not confined to online sales. Any transaction during which the customer with their payment card is not present is at risk for CNP fraud.
Whereas merchants are focused on the risks of fraud and theft to their online sales model, it’s important that equal vigilance is paid to telephone and mail-based orders. The same technologies used to validate, authenticate, and verify credit card details during an online sale must also be applied to these earlier established forms of sales.
Real CNP Fraud in Action
To stop CNP fraud, merchants must know how it happens. Understand that you are the first line of defense against CNP fraud. Don’t presume that because CNP fraud hasn’t happened to you yet that it won’t happen. This general negligence in the payment space enables fraudsters to continue with their criminal behaviors.

Stolen credit card details. Criminals acquire stolen credit card information to make fraudulent online purchases. Often the criminal does not have all of the credit card details, such as the CVV number or full address.

Card testing. Fraudsters make small purchases with stolen credit card details to test this data. When the data works, the criminal follows this up with large purchases from the same merchant. These sales are not flagged because the cardholder is now known to the merchant.

Diverted delivery. Fraudsters have the delivery sent to an address that is not connected to the credit card. Because the address verification service (AVS) does not review the entire address, the address mismatch can be missed.

Online skimming. Criminals prey on security flaws in online payment solutions and hack customer data. Often complete customer details including passwords, phone numbers, and order history are stolen – enabling the criminal to mimic the customer.

Fraudulent gift cards. Using stolen credit card details, criminals buy gift cards and then use these gift cards to make purchases or sell these gift cards to other criminals.

The 2016 LexisNexis True Cost of Fraud Study highlighted that U.S. merchants experienced an 8% increase from 2015 in the dollar cost of fraud loss. This means that for every dollar lost due to fraud, merchants are actually losing $2.40 to chargebacks, fees, and reinvestment for replacement of lost products or services.
Merchants are hit with loss of inventory, chargeback fees, increased issuer and acquirer fees, cost of product delivery, labor-related costs to fulfilling the order, and loss of revenue. Not to be overlooked in this true cost of fraud is the damage to brand reputation and how this fraud impacts merchant standing with credit card issuers.
Detecting CNP Fraud in Action
In its March 2017, Card-Not-Present Fraud Around the World study, the US Payments Forum collected data on how merchants use technology to detect and prevent CNP fraud. As part of their study, the US Payments Forum included data collected by the 2015 Merchant Risk Council Global Fraud Survey.
Highlighted in the US Payments Forum study is that according to the Merchant Risk Council survey, most merchants rely on the credit card CVV and blacklists, or negative lists, to authenticate purchases. Additionally, surveyed merchants plan to incorporate 3D Secure, device fingerprinting, and email address verification to their authentication methods.
This speaks to the need for merchants to look beyond one type of fraud detection and focus on implementing a true multi-layered approach. As emphasized earlier, criminals use a number of methods to commit CNP fraud, relying on various flaws and technology gaps to allow them to succeed. For example, while CVV is an effective way to prevent purchases by stolen credit card details, it is not the most effective method for stopping diverted delivery or card testing.
Card Not Present merchants—including merchants who sell via telephone and mail—must use the latest in fraud detection technology. The key is in using the right technology at the right time in the right way. This correct application of fraud detection technology requires proven fraud detection solutions and first-hand experience.
We urge you to review these fraud detection technologies:

Geolocation. Verify the location of the customer with the actual location of the active card.
Biometric analysis. Compare the customer’s fingerprint with that of the cardholder.
Address verification service. The issuer compares the addresses provided during the transaction.
CVV. Additional credit card security code required during the final payment authorization.
IP Intelligence. Deep analysis of the IP address used for the transaction to monitor possible risks associated with this location.
Device intelligence. Deep packet inspection and proxy piercing capabilities to expose specific identifying details of the connected device submitting the transaction.
3 Domain Secure. A cardholder authentication protocol for e-commerce transactions and CNP purchases.
Merchant co-op. New orders are compared against millions of orders taken by other merchants.
SSL. Secure encrypted communication protocols between devices and payment solutions.

Just as you rely on more than one marketing approach to promote your business, it’s necessary to layer fraud detection approach to protect your business. Stand up to Card Not Present fraud and know that with expert advice and proven technologies, you can ensure you’re not losing out to CNP fraud.

Every click, like, share, search, and comment can be tracked, stored, and processed to deliver a customized online experience for consumers. Using behavioral analytics, CNP merchants can deliver a dynamic, personalized browsing and shopping experience. The impersonal digital shopping experience quickly gets very personal by mimicking an in-store sales relationship.
Now we’re seeing this data analysis move from the level of the online store to a deeper level for fraud detection systems. Just as digital data allows companies to predict consumer wants and needs, it also allows for sophisticated machine learning fraud detection.
The same data that is used to track and predict customer shopping preferences can allow CNP merchants to detect fraudulent transactions before they happen. Moving at the same speed of the data processing that displays the red shoes instead of the blue shoes, machine learning algorithms keep tabs on the shopper identity, their mailing address, and credit card details.
Algorithms Matter in Fraud Detection
Machine learning is not new. It stems from the 1950’s, rising to prominence in the 1980’s with key algorithm developments. However, it is now coming to the forefront in the consumer online experience, thanks to big data. These algorithms have changed how fraud detection can work to better protect CNP merchants.
Built on algorithms, these are some of the common machine learning methods:

Random Forest. Excellent predictive abilities. Supports a range of data types. Requires special labeled data. The most popular algorithm used in fraud detection.
Deep Learning. Does not need special labeled data. Strong predictive abilities. Takes longer to train. Cannot handle a range of data types.
Support Vector Machines. Excellent predictive abilities. Can identify complicated patterns. Cannot handle a range of data types. Needs labeled data. Not scalable.
Neural Networks. Good predictive abilities. Can manage complicated patterns. Not scalable. Needs labeled data.
K-Nearest Neighbors. Responsive to anomalies and missing data. Good predictive abilities. Not good at interpretation. Needs labeled data.

While the Random Forest and Deep Learning algorithms are more robust than the other options, this does not mean they provide a flawless fraud detection solution. It all comes down to the data available, how this data will be used, and the end goals of the data analysis.
Similar to using a multi-layered fraud detection approach to analyze and respond to data, the same holds true with machine learning. The key is in using the right algorithm for the right scenario.
Is Machine Learning the Right Choice?
This is not a simple question to answer. When reviewing fraud detection solutions, it’s important to understand what machine learning can and cannot do. Is it the best and only option? Probably not. But should it be ignored because it’s still not perfect? No.
Machine learning for fraud detection cannot:

Think on its own. The algorithm and fraud detection capabilities depend on the quality of the data.
Learn quickly. It takes time for the algorithms to learn the data and how to interpret it correctly. Merchants must also have access to large volumes of data to build effective patterns.
Interpret anomalies. A person can notice a change in buying patterns around the holidays and approve these transactions. Algorithms don’t do this: they see the anomaly and flag the transaction, just as they’ve been designed to behave.

Machine learning for fraud detection can:

Respond quickly. Consumers want fast and immediate transaction processing. Machine learning enables this with its real-time learning and analysis. Approval or decline happens in milliseconds.
Be efficient. Whereas human error occurs during repetitive tasks, machine learning remains consistent in repetition and is superior at detecting patterns and anomalies.
Scale. Traditional rules engines cannot support continually growing datasets and new data inputs. Algorithms such as Random Forest and Deep Learning are quick to train and thrive on large volumes of data.

Machine Learning Is the Future of Fraud Detection
Fraud has become a sophisticated science. The only way to beat it is with sophisticated machine learning models and solutions.
We do know that machine learning is extremely efficient at preventing false positives and reducing the amount of time spent on manual transaction reviews. We also know that CNP merchants cannot simply rely on machine learning to detect and prevent fraud.
It still takes a multi-layered approach of using the best-in-class technologies and algorithms tailored to the data and the scenario to create the ideal fraud detection solution.
Verifi is your trusted resource for fraud detection and prevention solutions. Please contact us to learn more about machine learning and how we envision this technology shaping payments and fraud detection solutions.

Account takeover fraud is typically thought of as a threat to cardholders. However, merchants are equally at risk to loss and damage to their business due to this prevalent form of payment fraud.
The very nature of account takeover fraud results in more loss for the merchant than it does for the cardholder. Whereas the cardholder is able to absolve liability for the fraudulent use of their credit card, merchants are left without recourse to recover lost revenue as a result of account takeover.
Account takeover fraud is not limited to just credit or bank cards—email accounts, online shopping carts, mobile wallets, and even payment gateways can be impacted.
Account takeover is a threat to the payments industry at large. It’s not something that happens only in fiction or to other people: account takeover fraud is real and on the rise with the growth of CNP sales.
Account Takeover Fraud Hurts Merchants at All Angles
A data breach occurs and users of a well-known email service or customers of a large social media company are impacted. Their data is stolen—including passwords, email addresses, phone numbers, home address, and other secure identifiers.
This information can then be sold on the dark web to criminals who use advanced technology to access credit card accounts and online shopping accounts, to apply for new credit cards and more. Criminals then to use this stolen information to make purchases, complete cash advances, and do worse.
Typically, the cardholder is infomred of this fraud when they learn about a maxed-out credit card or see unknown charges on their credit card statement. This can take months, depending on the level of vigilance of the cardholder.
For the consumer, this fraud can have long-term impacts, with no knowledge of who has access to their personal information. Fortunately, most credit card companies do not hold violated cardholders responsible for the charges.
The merchant, however, is not so lucky. The losses for the merchant go beyond the cost of the lost merchandise and associated revenue. Merchants now have to deal with the trickle-down effects of this payment fraud:

Monetary fraud loss. This payment fraud is outright theft. As a result, there is no recourse with a chargeback representment case or other established measures to allow the merchant to recoup losses.
Cardholder distrust. While the fraud isn’t the merchant’s fault, the cardholder may not understand this. He knows his credit card was used fraudulently at “XYZ Merchant” and no longer trusts sending business their way.
Brand damage. While the security breach was not initially exacted upon a particular merchant, it’s not easy for this merchant to gain distance from its stigma. This can result in great damage to brand and reputation.

Merchants are dependent on cardholder confidence and trust. Account takeover fraud can slowly but surely chip away at consumer confidence when it comes to buying online.
Merchants must make as many efforts to prevent the damaging effects of account takeover fraud as they would to prevent chargeback and payment fraud.
Detecting and Preventing Account Takeover Fraud
CNP merchants should implement intelligent payment and fraud prevention solutions that use a multilayered approach. Account takeover criminals use the latest in advanced technology, and so merchants must have an equal or better level of technology working for them.
These fraud prevention tools include:

Geolocation. Verify the location of the customer with actual location of the active card.
Biometric analysis. Compare the customer’s fingerprint with that of the cardholder.
Address verification service. The issuer compares the address provided during the transaction.
CVV. Additional credit card security code required during the final payment authorization.
3D Secure. A cardholder authentication protocol for e-commerce transactions and CNP purchases.
Merchant co-op. New orders are compared against millions of orders taken by other merchant contributing in-network and scrubbed for fraud risk.
SSL. Secure encrypted communication protocols between devices and payment solutions.

Merchants should also monitor customer buying habits with a sight to unusually high purchases, purchases from an unrecognized address, a change in address, or purchases from a new or unknown device. It pays for the merchant to have a proactive customer service team that contacts cardholders when they notice unexpected purchasing activity.
Using a solution such as Verifi’s Intelligence Suite provides you with the multilayered and intelligent fraud prevention technology you need to combat account takeover fraud. You can contact us to learn how our fraud prevention experts can help set up a customized solution tailored to your specific business needs.

The Visa Stored Credentials Program comes into effect on October 14, 2017. This new program is designed to improve transaction processing for both merchants and customers. All merchants who store payment credentials on file will be impacted by this new program.
Recurring billing, subscription services, and m-commerce are on the rise: these are all transactions that can benefit from this update. The Visa Stored Credentials Program supports better storage and tracking of such transactions, making it easier to stop transactions that are likely to result in chargebacks.
Consumers want the ease-of-use and simplicity that comes with storing their data on file. The consumer drive is for faster payment authorizations and simpler checkout interfaces. This consumer demand, along with forecasted sales numbers, has stimulated change in how stored credentials are managed and processed.
The Visa Stored Credentials Program
This new program impacts merchants, acquirers, payment facilitators (PF), and staged digital wallet operators (SDWO) who process stored cardholder credentials. Merchants who support recurring billing, subscription purchases, e-commerce, or m-commerce transactions will be most impacted by the Visa Stored Credentials Program.
When stored credential transactions are easily identifiable, authorization and processing will be improved. According to Visa, this will result in:

Greater visibility of transaction risk levels for issuers
Results in higher authorization approval rates and completed sales
Fewer customer complaints and improved cardholder experience
Allowing participation in Real Time Visa Account Updater Service

The Visa Stored Credentials Program should allow merchants and payment solutions to track how and where sales are originating and to reduce the number of fraudulent transactions.
What Are Stored Credentials?
Visa defines a stored credential as “information (including, but not limited to, an account number or payment token) that is stored by a merchant or its agent, PF, or SDWO to process future purchases for a cardholder.”
These stored credentials are used in cardholder initiated transactions or merchant initiated transactions.

Cardholder initiated transaction. The cardholder is an active participant in the transaction.

Merchant initiated transaction. The merchant has received consent from the cardholder to store payment credentials for subsequent use. The cardholder does not need to give approval for these future charges.

Typically, merchant initiated transactions are used in subscription services, recurring billing agreements, or in instances where the cardholder has agreed to additional charges based on usage. For example: magazine subscriptions, pay-per-view television charges, or additional charges for use of a mini-bar in a hotel room.
Visa Stored Credentials Program Requirements
Merchants should review and fully understand the complete requirements of the Visa Stored Credentials Program, as detailed in the Improving Authorization Management for Transactions with Stored Credentials guide.
Merchants should ensure that by October 14, 2017 they have updated their authorization and checkout pages to comply with the new stored credentials program.

Cardholder consent for credential storage is required.
Tell cardholders how this data is stored and used.
Update consenting cardholders on any changes to the merchant’s terms of use for this data.
Merchants must comply with the new Store Credentials indicators to identify the initial storage and usage of stored payment credentials. Review the Stored Credential Transaction Framework for details on these indicators.

It’s important for merchants to understand that this consent is required for all new transactions, as of October 14, 2017. Merchants are not required to obtain retroactive consent from cardholders for whom this data is already being stored and used.
The proper identification of these stored credentials, including how they are used, is critical in complying with the Visa Stored Credentials Program. Merchants must fully understand these requirements and ensure that their payment solution supports these labelling and processing changes. (Read the sections titled Global Stored Credential Transaction Framework Mandates and Use and Definition of Value “C” in the POS Environment Field for clear details on labelling.)
Getting Cardholder Consent for Stored Credentials
Merchants should clearly communicate to cardholders how and why their data is being collected and stored. Remind cardholders that this storage improves security by eliminating the risk of stolen data, and that this stored data improves transaction processing speeds.
Merchants must comply with specific consent requirements for these stored credentials, including:

Only storing a truncated version of the cardholder data
Informing the cardholder of specifically how this data will be used
Providing details on the consent agreement expiration data and how the cardholder is to be notified of any changes to the agreement

Additionally, merchants should follow standard recommended best business practices of providing clear refund policies, the complete schedule for recurring/subscription charges, details on surcharges, and how to contact the merchant for questions.
Getting Ready for October 14, 2017
The details of the Visa Stored Credentials Program were first made available to merchants in the October 2016 and again in April 2017 Visa Global Technical Letter and Implementation Guide and Visa Rules. Visa recommends you refer to these two guides for full details on compliance with the new program.
Please contact us for more information about the new program requirements and how they impact you. Our team of payments solutions experts are happy to answer any questions to ensure your solutions comply with the Visa Stored Credentials Program.

There is a long-running misunderstanding about fraud that can potentially set up merchants for failure. Many merchants mistakenly believe that the most common type of fraud falls into the white-collar crime category. Sadly, this is very far from the truth.
The reality is that merchants of all sizes are repeat victims of friendly fraud. This term appears to be a misnomer, but one that has become commonplace in the payments industry. Friendly fraud is so common that most merchants don’t even realize it’s happening. Rather, they assume the threat of revenue loss, increased issuer/acquirer fees, and credit card monitoring programs are just compulsory features in the business world. This thinking is even more prevalent among CNP merchants, many of whom are still learning how to gain a foothold in the growing m-commerce space.
Debunking Friendly Fraud
To understand the disruptive force of friendly fraud, it helps to reframe it in a traditional brick-and-mortar sales model.
A brick-and-mortar sale can resemble the following:

The customer buys the product in the store
Takes it home and decides it isn’t right or they no longer want it
The customer returns to the store with the product and returns it.
The customer receives a refund or store credit
The merchant is able to restock the product and has not lost any revenue

A CNP sale can resemble the following:

The customer buys the product online with their credit card
The product is delivered to the customer’s home and left at the front door without a signature
The customer decides they don’t want the product
The customer contacts their credit card-issuing bank and asks for a refund
The credit card-issuing bank complies and files a chargeback against the merchant
The merchant has to deal with revenue loss, the cost of chargeback representment, fees from the acquirer and card brand, and lost merchandise
The customer receives a refund, keeps the product, and enjoys using it

In short, the customer effectively steals the product from the CNP merchant and is never charged with theft. There is nothing friendly about friendly fraud. Yes, people make mistakes or regret buying an item, but this is not the fault of the merchant.
Merchants have the power and ability to stop this vicious cycle of fraud. By implementing smart payment solutions and making internal process changes, friendly fraud can be stopped. Until merchants are proactive in stopping this type of fraud, they will continue to experience lost revenue, issuer fees and penalties, and the cumbersome chargeback representment process.
How Friendly Fraud Happens
Savvy fraudsters know that merchants are loath to suggest that a customer is stealing from them, for fear of damage to their brand and reputation. Combine this with the longstanding belief that “the customer is always right,” and merchants must move to be proactive in stopping friendly fraud.
The first step in stopping friendly fraud is in knowing how it typically occurs:

Customer claims the item wasn’t delivered
Customer claims the purchased item doesn’t match the online description
Customer claims they returned the item and have yet to receive a refund
Customer claims the order was cancelled but the item was still delivered
Customer claims not to remember making the purchase

The step to take in response to one or all of these five theft approaches is to acquire knowledge and evidence. This is where having an intelligent solution such as Verifi’s Cardholder Dispute Resolution Network (CDRN), which connects merchants and their customers, can help end the confusion over these disputed purchases.
Take Control and Stop the Cycle
Merchants would be wise to look beyond the standard approaches to fraud prevention and concentrate on the latest in data intelligence technology. Merchants should display a clearly visible and concise return/refund policy, maintain a proactive customer service team, submit clear billing descriptors, and manage a virtual paper trail that tracks the purchase and delivery of the item.
The time has come to move beyond traditional methods of fraud prevention and to be vigilantly proactive in stopping the revenue loss. Merchants should take advantage of key fraud prevention technologies including:

IP intelligence. Deep analysis of the IP Address used for the transaction, to monitor possible risks associated with the location
Device fingerprinting. Uses device information and reputation scoring to validate the transaction request
Merchant Co-Op. Transactions are compared against a list of orders, looking for matches with fraudulent accounts
Address Verification Service (AVS). Verifies the address connected to the cardholder using a comparison look-up
3D Secure. Uses a three-domain model to validate credit and debit card purchases
Tokenization. Account and card information is replaced with a secure token identifier
Geolocation. The location of the cardholder and the customer are compared
SSL. Provides a secure encrypted communication between customer devices and payment solutions

These innovative anti-fraud technologies put the power back in the hands of merchants. The deep knowledge and data collection of these technologies gives merchants the upper hand. Now merchants can understand customer patterns, identify risk before it happens, and find lapses within their payment environment.
The choice is up to you. It’s time to act and take control of friendly fraud. We invite you to contact us to learn more about CDRN and our expertise in fraud prevention technologies. We are fraud prevention experts, and we are committed to supporting merchants to help stop friendly fraud.

Insights on preventing transaction disputes and chargeback fraud from Verifi, leading experts on payment protection management and e-commerce solutions

When a customer sees a charge that they don’t recognize on their credit or debit card statement, often their first reaction is to contact the bank directly, requesting the transaction to be reversed. These disputes often lead to the issue of a refund, or chargeback, as it is often not deemed cost-effective for banks to open an in-depth investigation, and they lack the transaction information to legitimize the sale or satisfy the cardholder promptly.
Verifi’s research has shown that up to 86% of cardholders take this route when disputing transactions, and the problem can quickly scale up. Merchants are not only hit with the cost of each reversed transaction, but there is added impact in the form of various fines, fees, and related operational expenses—not to mention the resulting long-term damage to customer relations.
A large volume of chargebacks that merchants are routinely landed with is commonly referred to as “friendly fraud.” In these cases, the customer is genuinely responsible for the transaction in question but either fails to recognize it or decides to pursue the dispute, since they are aware of these weaknesses in the system and know that such claims remain unchallenged.
Be it due to fraud or non-fraud disputes, most of the time merchants are informed of these chargebacks when it’s already too late to resolve them without incurring added costs, damages to customer relations, and lost sales.
To effectively tackle these challenges, innovation in technology is needed to better align the interests of cardholders, issuing banks, and merchants, to bridge the order information at the time a customer initiates a dispute.
Verifi has developed solutions that address this growing problem holistically. First, Verifi’s Cardholder Dispute Resolution Network (CDRN) integrates directly with the top issuing banks and pauses the dispute process for up to 72 hours. The cardholder dispute is redirected through the CDRN patented “closed loop” platform from the bank to the merchant in near real-time. This allows merchants time to assess and resolve the issue appropriately before it becomes a chargeback, which works equally well for both fraud and non-fraud dispute resolution.
Verifi’s CDRN supports more than 15,000 merchant accounts and handles over 200,000 individual disputes each month.
Additionally, Verifi recently launched Order Insight, a service that enables near real-time sharing of robust transaction details between cardholders, merchants, and issuers. Whenever a dispute arises, all parties are able to access this information to eliminate customer confusion, determine the legitimacy of the sale, and reduce “friendly fraud.”
By being able to share and access data—such as purchase item description (size, color, style), date of purchase, merchant’s name and contact information, customer’s device used, IP address, etc.—the volume of chargebacks can be significantly reduced. This results in fewer fees and penalties imposed on merchants, but most importantly the retention of sales and improved customer relations—all of which translate into increased profits.
For companies to succeed in the future, automation and continual innovation will be key. This is necessary to keep pace with new technologies—from encryption to IoT, as well as big data and Artificial Intelligence now emerging in the payments ecosystem—and to anticipate evolving industry demands as well. Getting this right is vital to providing merchants and consumers with a better experience by reducing instances of fraud, and thereby save the industry billions in avoidable losses.
Find out more about how this technology can boost your bottom line at https://www.verifi.com/

FinTech is here and it’s on an upwards trajectory. Not only is FinTech changing payments, it has already changed payments. In fact, the technologies that define FinTech have made it possible for CNP merchants to exist and prosper.
It is hard to know which came first, the technology or the demand. Regardless, FinTech is allowing merchants to sell online to anyone anywhere in the world—a true game-changer.
Fintech is in a state of constant evolution; what started with real-time payments has now morphed into mobile wallets, P2P payments, digital currency, and omnichannel payments. These new payment models have placed new demands on merchants, financial institutions, and customers.
What the Customer Wants
At first glance, it appears that customers are the ones driving the trend towards advancing technology in payments. Today’s customers demand the freedom to buy through any device at any time. However, this new level of expectation is tied to the technology innovators who put their solutions in the hands of customers.
FinTech innovators recognized early on that to attract adoption and commitment, they needed to engage customers and prove that these new technologies can make their lives better. Customers weren’t asking for real-time payments options such as PayPal or Stripe; they did not try hovering their watch over a POS terminal in hopes of a transaction, nor did they ask to email money to their friends.
Thanks to savvy marketing and ease-of-use, these payment methods have become the standards in consumer use. Having a PayPal account or watch that can access bank accounts in real-time or emailing money are no longer novelties.
This has given rise to customer expectations for better mobile and CNP payment options. Seamless experiences across digital devices, secure passwords storage, instant account debiting, and the option for consumers to pay however they want—by credit card, debit card, email transfer, PayPal, text, Bitcoin—are forcing merchants to reassess their payments infrastructure.
Merchants Must Deliver on FinTech
Just as the Internet has changed the face of sales, FinTech has done the same for payments. Merchants can no longer assume that their customers will pay with a bank or credit card. Now, it’s up to merchants to be one step ahead of customers and prepare to accept a variety of payment methods.
These new dynamics in payments have highlighted a flaw in the traditional payment landscape: the ability to change quickly and efficiently. The FinTech drive is slowly correcting this inherent payments flaw. As merchants are forced to support new payment options, they are forcing financial institutions to change and update their technology to support these new customer payment demands.
Inclined toward convenience, customers want as many payment options as possible. Savvy merchants are poised to deliver on these options and are investing in payment solutions to enable change. Financial institutions accept this in order to stay relevant, as they must meet the demands of their customers (i.e. merchants).
This change does bring with it one critical problem: security threats. And this is where merchants must be proactive. Remember, customers not only demand the latest in payments technology but they also expect guarantees that their data is secure. This is particularly the case with the millennial generation who, of all buying groups, are more skeptical of FinTech security.
Payments Solutions Must Be Positioned to Evolve
Merchants must deliver on two fronts: the end-user experience and the back-end payments solution. These both hinge on secure data and fraud prevention. Without these cornerstones of payments, the merchant loses and the customer never returns.
Along with supporting an end-user experience that is sleek, fast, and option-rich, merchants should consider incorporating the latest technologies in fraud prevention and security.

Geolocation: Verify the location of the customer with the actual location of the active card.
Biometric analysis: Compare the customer’s fingerprint with that of the cardholder.
Address verification service: The issuer compares the addresses provided during the transaction.
CVV: Additional credit card security code required during the final payment authorization.
IP intelligence: Deep analysis of the IP address used for the transaction to monitor possible risks associated with the location of the transaction.
Device intelligence: Deep packet inspection and proxy piercing capabilities to expose specific identifying details of the connected device submitting the transaction.
3 Domain Secure:A cardholder authentication protocol for e-commerce transactions and CNP purchases.
Merchant co-op: New orders are compared against millions of orders taken by other merchants contributing in-network and scrubbed for fraud risk.
SSL: Secure encrypted communication protocols between devices and payment solutions.
Tokenization: Replaces sensitive account and card information with a non-sensitive token or placeholder.

Merchants who can easily enable the latest in payments security solutions are better poised to be successful adopters of FinTech payment options. Without a proven secure payments infrastructure that actively analyzes customer data—interpreting digital signals and relaying information in real-time—merchants cannot deliver on new payment options.
Merchants who attempt to accept the latest in payments without a secure payments solution may quickly find themselves coming out on the losing end.
The first step in preparing for advances in FinTech lies with your payments solution. You must use a payments solution that evolves with changes in technology and fraud prevention. Your payments solution also needs to provide customer data analysis, so you can anticipate rather than react to new payment options.
You can learn more about Verifi solutions such as Intelligence Suite and how it supports your adoption of FinTech tools. Contact us with your questions—we’re happy to help.

Attracting and keeping millennial buyers as loyal customers is an important goal for CNP merchants. This generation has an estimated $600 billion in purchasing power, which is expected to grow to $1.4 trillion by 2020. These are numbers that merchants can’t afford to ignore.
The good news for merchants is that millennial buyers are attracted to recurring billing options. They appreciate the convenience and affordability offered by modern subscription services. With the ability to subscribe to grocery orders, beauty products, household items, music, and clothes—the inconvenience of outbound shopping for daily consumables and services are alleviated.
Recent research of millennials’ consumption revealed that more than 70% have a product subscription and 89% have a service subscription. One of the reasons cited for this preference for subscription purchases is the overwhelming amount of choices buyers are facing. A regular weekly delivery of groceries, for example, alleviates decision-making and reduces what this demographic sees as unnecessary hassle. The simpler the better when it comes to day-to-day conveniences, and the recurring billing model fits this lifestyle perfectly.
However, as merchants know, recurring billing can bring with it a range of payment and chargeback issues. But with some smart outreach and proactive communication, merchants can prevent the common causes of recurring billing-related chargebacks.
It’s up to merchants to use best business practices to protect themselves from the inherent risks of recurring billing.
Clear Subscription Policy
Merchants must make the subscription policy terms obvious and easily available. Display this policy on the checkout page of the website, on confirmation emails, and on any receipts included with product delivery. Detail the terms of the subscription, including the length of the subscription, the charge schedule, the amount of each charge, and the details of the customer’s agreement to pay for the subscription. It may be helpful to have a checkbox on the payment page that the customer ticks to confirm agreement to the transaction.
Easy Cancellation
When it’s easy for a customer to cancel their subscription, they’re less likely to contact their credit card issuer and file a chargeback. Some merchants include a link on the confirmation email and on the website that provides clear instrucitons on how to cancel. It is important that a cancellation is followed up with an email that details the terms of the cancellation, including pending payments unaffected by the cancellation and how these are processed. Always include contact information on the cancellation page and confirmation emails, providing the customer a simple way to reach out with any inquiries.
Regular Emails
Along with a detailed confirmation email, it’s a good idea to send billing reminder emails. This helps prevent the “I forgot I ordered this” friendly fraud claim. Send customers a reminder email detailing their next recurring billing credit card charge. This should include a reminder of their agreement to this recurring transaction and provide details of the length of the subscription—when they will be charged, the charge amount, and when they can expect delivery of the product or service. Include contact information to make it easy for the customer to ask questions, change their subscription, or to cancel.
Free Trial Rules
A great marketing tool for subscription services is to include a free trial. However, these free trials often result in friendly fraud chargebacks. It’s very important that the rules of the free trial are made clear. If the free trial has an automatic subscription at the end of the 30-day trial, for example, it’s important to communicate this clearly. When customers register for the free trial, display the free trial guidelines on the website and in the confirmation email.
Making Recurring Billing Work
Along with these suggested business practices, it’s imperative that merchants remember the cardinal rule of customer-merchant relationship building: be available, accessible, responsive, and helpful.
When merchants are quick to respond to questions and do their best to solve customer problems, the prospect of there being disputed transaction or resulting chargeback is greatly reduced.
The millennial generation is connected, vocal, and very aware of their consumer rights. Merchants can quickly takes hits on their bottom line from negative social media comments or online reviews. Remember, millennials prefer subscription models because they are simple and straight-forward—so, ensure that you are simple and straight-forward with your communication and policies.
The CNP recurring billing space is becoming more crowded: good customer service and modern business practices allow you to stand out from the crowd. To learn how you can monitor lost recurring billing revenue and better manage customer communication, contact our team of fraud prevention experts.

Remember the small local grocer or family-owned corner store? The owner and the staff knew most everyone who came in. Conversations carried on, big and small issues were discussed, and relationships were built. The customers at these stores felt like they knew who they were buying from, and this created a level of trust and open communication. Problems were solved easily and openly, and rarely did the customer leave in anger or was the merchant forced to deal with a formal complaint.
Friendly fraud simply didn’t happen in these businesses. There was no reason for it—customers knew they could get their purchase problems resolved with a discussion with their merchant.
Today, this kind of community relationship is disappearing. With the new CNP and m-commerce business models, this customer-merchant relationship is evolving into something less informal. It’s rare that a customer knows who they’re buying from online, and merchants rarely have a chance to directly communicate with their customers.
Friendly Fraud and Modern Business
This shift in business practices has allowed for the appearance and rapid advancement of friendly fraud. Customers can become frustrated when they don’t know who they’re buying from, then they believe they have no choice but to contact their credit card issuer and file a chargeback. Merchants are left dealing with lost revenue, lost customers, a damaged brand, and confusion over how the sale ended in a chargeback.
These friendly fraud chargebacks generally are not filed out of malicious intent. They’re filed because the customer doesn’t know what else to do. Often, these customers don’t even understand the ramifications of filing a chargeback—or that what they are doing is called filing a chargeback. The customer just knows that they have a problem and they want it solved quickly and easily. For them, the obvious option for the customer is to contact their credit card issuer and request a refund.
Helping Customers Help Themselves
The solution to this modern business problem is to restore the trust and open communication between customers and merchants. It’s time for CNP merchants to change the way they interact and communicate with their customers. By opening the lines of communication, customers feel empowered to contact them about problems and are less likely to react with a disputed transaction.
With changes in messaging, merchants can eliminate the sense of invisibility underlying the current CNP customer-merchant relationship.

Better contact information. Clear and obvious contact information is a must. Think of how customers used to walk into a store and talk to the owner. The equivalent needs to happen today. Make sure customers know whom to contact and instill their confidence that their email will receive a response.

Respond to customers. Nothing fuels a customer’s frustration more than emailing a merchant and not receiving a response. The customer is confused and doesn’t know what to do, so they get angry and contact their credit card issuer. Merchants must respond to customer emails quickly and do their best to alleviate customer concerns.

Get personal. Build a relationship with customers. Email the customer and follow-up with them on their purchase. Make sure they’re satisfied, ask if they have any questions, suggestions for improvements, etc. This helps build that corner store relationship and encourages the customer to contact the merchant directly when there is a problem.

Social media outreach. Facebook, Twitter, Instagram, and Google+ are vital to building a customer-merchant relationship. Customers use these social media tools to provide feedback, reviews, and complaints about the merchant. Merchants would do well to do the same: engage in conversations, respond to feedback (good and bad), and follow up with customers who post on social media channels. Thank customers for supporting the business, and provide perks for these customers who do reach out.

This all comes down to being visible. When the open communication is invited and established, it’s possible for trust and confidence to be restored or built anew between the customer and the merchant.
Customer-Merchant Communication
Customers need to believe that their problems are best solved by contacting the merchant directly. The common reasons for friendly fraud chargebacks, owing to confusion over an order, forgetting that they bought it, or the product not being as described, are now resolved with emails, conversations, and open communication.
The pressure is on merchants to foster this customer-merchant relationship. Be visible, communicate openly, and strive to build a platform of trust for your customers. Using a payment solution that supports this open communication can make it easier for you to support and foster this relationship. Learn how Order Insight® can eliminate invisibility and create reliable customer-merchant relationships.

Confidence and trust in fraud prevention and security technologies is a must. Merchants are expected to have fraud-proof solutions in place. Customers are expected to protect their personal data. Issuers and acquirers are trusted with verification and authorization management.
These are a lot of layers in a secure payment processing environment. The more layers and participants, the more room for error and disruption. Paperwork gets lost, records are hacked, files are deleted, and chargeback fraud happens.
What if these layers of accountability were streamlined, removing the need for human checks and balances? Decentralizing the way all transactions are stored, tracked, and approved could be the solution.
Enter blockchain banking. Could this be the solution to preventing internal and external fraud?
Blockchain: What Is It?
Blockchain uses a shared, secure ledger to track and approve each component, or block, within a transaction. Each step in the transaction is represented by a block. The blocks are connected within a secure chain as a transactional record. And each block in the chain has a timestamp and other identifying data to prove who did what and when.
The multiple layers of approval and review are eliminated with blockchain, packaging the transaction in a single linear chain of request and approval. This process creates a complete record of any type of asset transfer. Think of banking, payment processing, contracts management, wills and real estate, money transfers, and medical records—all can be better protected with blockchain.
Using Blockchain for Chargeback and Fraud Prevention
Protection from identity theft and fraud is a constant challenge for everyone involved in buying and selling. Merchants, consumers, issuers, and acquirers know there are vulnerabilities in how payments and data are secured. With each innovation in security technology, hackers and fraudsters learn how to outsmart the technology and breach these networks.

The question that lingers is how to stop this rising tide in fraud. Blockchain banking, while not a panacea, could be a marked improvement in how data is created, approved, transferred, and stored.
With its single ledger system, blockchain banking can work to eliminate the layers of multiplicity and data transfer that happens within one single transaction. The more layers, the more room for error; the more time delays, the more risk and vulnerability. When done right, blockchain can eliminate these vulnerabilities:

Real-time monitoring. Timestamps fix a traceable timeline, featuring the how, who, when, and where of accountability.

Real identities. Each block (account, credit card, transaction) is linked to a real person or company. Identities cannot be hidden or buried in paperwork.

Eliminate third-party approval. Blockchain relies on 51% approval of those involved in the transaction. Third-party approval is not required or permitted. Only those in the chain can access and approve.

Paper is replaced with digital data. Proof of purchase, approval records, receipt of items, and other payment data is stored in the blockchain. The merchant, issuer, acquirer, and customer all have access to the same secure data—saving time and money in the event of a chargeback representment

Error and complexity are thwarted. Fake data, errors in approval, double purchases, etc. are prevented within the linked blockchain process. Fraudulent data cannot be inserted into the blockchain.

This secure chain of data approval and transfer can change the way information is exchanged. The pressures and insecurities of customers, merchants, issuers, and acquirers can be alleviated within this new level of communication and data storage. By removing the expectations on each participant in a purchase, risk is eliminated—providing everyone with a more secure way of doing business.
However, as we know with every innovation there is risk. While blockchain banking has decentralized data storage and requires the majority approval of each block, breaches can still happen. In August 2016, Bitfinex was hacked resulting in a theft of $60 million in Bitcoin. This stolen Bitcoin has not been recovered. This hack occurred within the blockchain when savvy hackers gained control of the keys and signatures that are used to secure the chain.
Learning More About Blockchain and Fraud Prevention
Blockchain holds a great deal of promise for improving security and reducing fraud. But like the Internet of the early 1990’s, this technology is very much in a growth and learning phase. Resisting the enthusiasm over the improvements that blockchain can provide, we must remember that m-commerce, Tap & Go, smartwatches, Apply Pay, and other innovative payment methods didn’t happen overnight.
Experts at Verifi are committed and probing in their learning of how blockchain can provide merchants and issuers a secure and protected payments environment. We welcome you to contact us with any questions you have about blockchain or other fraud prevention solutions.