A monthly forum of  compiled insight from top leading industry thought leaders to help you protect your payments and boost your profits

Question of the Month

How can I get a handle on all the different device authentication technologies available and what are the best practices to boost security without boosting false declines?

Card-Not-Present (CNP) commerce is on the rise and global retail e-commerce projected to hit $2 trillion by 2016. The increasing popularity and adoption of smartphones is boosting these numbers, as almost a quarter of people worldwide own a smartphone. Mobile remote and proximity payments will continue to grow, prompting additional security measures to garner consumer trust and adoption and to protect payments across all channels. There’s no silver bullet when it comes to device authentication but using a layered, comprehensive approach is the best bet. Multi-layered authentication enables businesses to tailor fraud and security controls to their unique needs and business models. With new device authentication technologies, businesses can effectively do this without sacrificing consumer conveniences.

Here is what the experts are saying:

• “Cool” may not mean safe. MasterCard recently demonstrated how it plans to accept ‘selfie’ photographs and fingerprints as password replacement/alternative for online payment verification. While this is a cool concept that is sure to be embraced by the smartphone selfie generation of Millennials, merchants should also take heed. Another company was able to create a spoof finger with clay and some Play-Doh.
• Multi-Layered Authentication vs. Biometrics. Biometrics verifies user identity through unique biological characteristics (voice, fingerprint, retina, signature). The benefit of this technology is that the user always has this biological “password” with them, negating the need to remember an actual password or pin or code. Multi-layered authentication uses multiple factors to verify a person’s identity: something you know, like a user name, and something you have, like a mobile device. They both have downsides: biometrics can be replicated in some instances and multi-factor authentication requires a level of network dependency for issuing unique login codes, etc. Both are great options for merchants looking to stay ahead of the security curve.
• The true cost of false positives. Research shows that merchants are declining legitimate transactions they suspect to be fraud more than they think. This is costing merchants in a big way. $118 billion was falsely declined whereas only $9 billion was lost to fraud in 2014 and 32% of those falsely declined opt to never shop with that merchant again.
• Use a Gateway Partner to Centralize and Streamline Fraud and Risk Prevention. Implementing best practices and adhering to industry standards for device authentication takes time and resources. Creating and executing a successful, risk-appropriate authentication strategy requires fine-tuning that many merchants simply don’t have the resources to perfect on their own. Working with a third-party vendor can alleviate the resource burden, freeing up merchants to get back to running their business.

 Parting Words

Mobile remote and proximity payments will continue to grow, prompting additional security measures to garner consumer trust and adoption and to protect payments across all channels. Omni-channel merchants must balance a secure purchasing experience with a positive purchasing experience, taking into account the trade-offs between security and convenience and considering the total cost of each. The considerations outlined in this white paper should help merchants evaluate their current processing gateway and validate if it is agile enough to adapt to changing opportunities and security demands as fraudsters become more educated, dynamic and voracious in the CNP channel.
Verifi’s end-to-end payments protection suite tightly
couples our Global “Super Gateway,” Intelligence® Suite and Cardholder Dispute Resolution Network™ (CDRN) and Chargeback Representment (CBR) services so you can protect your revenue streams and process payments more securely and seamlessly. Gateway’s Intelligence® Suite provides a comprehensive fraud management platform that enables you to cost-effectively layer, test and adapt best-of-breed tools as the marketplace – and fraudsters
– evolve.
Don’t forget to download our updated ebook: What Every Card Not Present Merchant Should Know: Navigating Today’s Challenging Payment Ecosystem? Get it now!
Contact us to find out how to guard against online payments fraud and expensive chargebacks. Have your own thoughts on what you read? Ping us on twitter (@verifi) with #paymentstips and let us know what you think.

Each month, we’ll help you navigate the emerging trends and forecasts for card-not-present (CNP) merchants with (what we think) are the best pieces of advice from Verifi, as well as from across the web. We promise to keep this newsletter short and sweet, so let’s get started!

Question of the Month

What’s the forecast for post-EMV CNP fraud, how is mobile shaping payments and what’s the deal with Millennials?

This month, we’re looking at Millennials and how this large and in charge generation of consumers is shaping the payments industry. Given their inclination to use mobile to pay, there are key things merchants need to know to keep mobile payments safe. We’ll also explore the post-EMV payments world and what it means for CNP fraud.
Spoiler alert: EMV caused CNP fraud to skyrocket overseas and there are some valuable lessons for US merchants to learn from that experience. [Tweet This]
Payments post-EMV isn’t all bad news, though. EMV ushered in increased popularity of mobile proximity payments, thanks to NFC technology that comes in most EMV-ready terminals to which merchants upgraded. We’ll explore how mobile payments and loyalty programs require ease-of-use and convenience to convert shoppers. Finally, we’ll take a look at the top cyber security concerns of 2016 and how merchants can remain compliant without breaking the bank.
MILLENNIALS SHAPING PAYMENTS
The millennial generation, which includes people born between 1981 and 2005, is bigger than the Baby Boomer generation. Additionally, it’s proving to have more financial influence. This generation is extraordinarily tech-savvy and live almost entirely through digital means. As such, they are helping to shape the world of payments, namely mobile payments – the preferred method of payment for this generation.
Millennials love instant gratification and have a natural inclination toward mobile payments thanks to the convenience it offers. Millennials prefer to ditch the cards and cash for payment via smartphones, which can be conducted anywhere quickly and negates the idea of carrying a physical wallet.  A JWT study showed that 44 percent of millennials surveyed preferred mobile over cash as the way to pay. [Tweet This] Almost 50% said they’d be willing to connect mobile wallets & payment info to a wearable device.
POST-EMV CNP FRAUD WAVE
CNP fraud is slated to skyrocket to $7.2 billion by 2020, according to Aite Group. There is no coincidence that this is happening after the EMV implementation. Overseas, the U.K and France saw a 100% and 360% increase in CNP fraud respectively after migrating to EMV.
To combat this fraud, merchants will need to employ a multi-faceted approach to security and fraud prevention. This includes protecting transaction data, preventing avoidable chargebacks, mitigating online fraud and cyber security concerns and recovering revenue from chargebacks that can’t be avoided. Multi-layered authentication is critical; in a given year, 25% of companies are impacted by data breaches. [Tweet This] While increased fraud and reputational damage are a given result of data breaches, merchants should be aware of the increased chargeback risk as well. In 2014, someone became an identity fraud victim every two seconds. This increase in identity theft results in a rash of chargebacks further downstream after the identities are sold on the black market and used to make fraudulent purchases.
While this generation will continue to shape payments and forge new technologies to the forefront of the industry, it also comes with added security concerns for merchants. This generation – while tech savvy – is also security lazy and puts sensitive data at risk more often and more frequently than other generations.
MOBILE MOVES LOYALTY
Loyalty programs aren’t what they once were. In fact, Today, less than one third of consumers let loyalty programs drive their retailer preference – down 13% over the last 5 years.  Less than half say they even redeem loyalty rewards when they shop.  Fewer than half say that they even use their loyalty benefits when they shop.
As consumer behavior has transitioned from in-store to online to mobile, their loyalty habits have changed. Merchants who have loyalty programs should be adapting to updated consumer shopping habits and preferences.  Mobile means smaller screens and consumers on-the-go. Subsequently, merchants need to adapt the mobile checkout process to be efficient, convenient and void of unnecessary friction without sacrificing security.
Thanks to EMV, mobile proximity payments have gained traction as most of the EMV-capable terminals that merchants upgraded to are also NFC-capable. NFC is the technology behind mobile wallets. It’s predicted that loyalty will be a large driving force behind the continued adoption of mobile wallets – and vice versa. Businesses that integrate robust loyalty offerings into their mobile wallets will likely see an uptick in the number of consumers adopting mobile payments for in-store purchases.
STATE OF CYBERSECURITY
Trustwave Holdings Inc. recently released its 2016 Security Pressures Report illustrating the results of a survey of in-house IS professionals and the pressures they face in mitigating cybersecurity threats both in the U.S. and abroad. Below is a snapshot of the top cyber security concerns:

• 65% of professionals surveyed expect greater pressure to secure the organization in 2016 as compared to 2015 [Tweet This]
• 58% of those surveyed believe external sources pose the greatest threat to security and 41% say internal sources pose the greatest threat to security [Tweet This]
• Of the IS professionals surveyed, 44% said they face pressure to adopt cloud-based technology in 2016 [Tweet This]
• The second-highest technology IS professionals feel pressured to deploy is Internet of Things, with 17% feeling pressure to adopt in 2016 [Tweet This]

Because any merchant storing card holder data must follow PCI DCC Compliance regulations, online merchants must take special precautions when handling sensitive cardholder data. Becoming and remaining PCI compliant is expensive – but failing to protect sensitive data and becoming the victim of a breach is even more expensive. Merchants must find the right balance of security, convenience and profitability to ensure they protect payments while turning a profit.

 Parting Words

Despite post-EMV hiccups and CNP fraud ripples, there are some positive things happening in the world of payments. Millennials will continue to drive new payments technology and increase adoption of both mobile and wearable payments, creating more opportunity on these channels. This increased activity may even spur new and improved loyalty programs for merchants inclined to get ahead of the game and adapt to changing shopper preferences. Finally, security remains a top priority for merchants. Striking a perfect balance between conveniences, security and profitability will be a key priority in 2016.
Ask us how our Cardholder Dispute Resolution Network (CDRN ™) can help prevent and STOP chargebacks before they happen as well as provide a feedback loop to inform your front-end fraud control tools. Since chargebacks cannot be completely avoided, our Chargeback Revenue Recovery service provides representment expertise so you don’t leave money on the table. We’ll help you decide when to fight and when to walk away, so you can focus on what’s most important – running your business successfully.
Don’t forget…you can now download our updated ebook: What Every Card Not Present Merchant Should Know: Navigating Today’s Challenging Payment Ecosystem? Get it now!
What are your thoughts? Ping us on Twitter (@verifi) with #paymentstips and let us know what you think.

This month, Matthew Katz expands upon the idea of striking a balance with your fraud prevention tools. A comprehensive, balanced approach is the best approach to ensure that your transactions are protecting and that you aren’t turning away good customers. One tool in particular can help you strike the perfect balance when it comes to pre-sale and post-sale fraud prevention.

Want more information on how fraud prevention on the front end is impacting your business’ objectives? Take a look at these white papers for a deep-dive into the concept:
What Merchants Can Learn About Fraud Protection from Goldilocks
Device Fingerprinting Solutions and the Evolution of a Comprehensive Fraud Prevention Strategy

A monthly forum of  compiled insight from top leading industry thought leaders to help you protect your payments and boost your profits

Question of the Month

What do I need to know about online payments fraud in 2016?

February continues to reveal new predictions and forecasts for all things payments in 2016. One overarching theme that will not abate anytime soon is the alarming rate at which online payments fraud is on the rise. Between EMV, the holiday chargeback hangover and emerging payments technologies, CNP fraud continues to increase inline with what experts predicted last year.  We’ve done some research on the topic and pulled the best snippets on how to mitigate fraud and chargebacks this year, despite crafty cyber criminals and market forces that drive fraud to the online channel.

Here is what the experts are saying:

1. Know your customer. Javelin Strategy & Research predicts that CNP fraud (including online transactions), will eclipse POS card fraud four-fold by 2018. The best way to combat this trend is to implement a layered, tailored, comprehensive fraud prevention strategy that is agile enough to grow and meet emerging threats. One specific tactic includes eliminating checkout through guest profiles and requiring purchasers to securely log in with their own credentials. This can aid in behavioral analytics to sift out “questionable” accounts and ensure that bad actors are shut down before they do damage.
2. Utilize 3D Secure Protocols. In a recent fraud report released by The PayPers, Cardinal Commerce points out that EMV will undoubtedly continue to push fraud to the CNP channel where there is low-hanging fruit for bad actors. Combining a comprehensive fraud prevention strategy with the 3D Secure tools offered by the card brands can ensure merchants are on the right side of the liability shift for authenticated transactions and reduce costs associated with manual reviews and interchange rates.
3. Emerging payments technology and the Internet of Things (IoT) will increase security risks. Smart devices, wearables and the evolution of the Internet of Things means more personally identifiable information (PII) will be circulating. Given the already difficult job of security sensitive information merchants face, these new technologies will further complicate matters.
   More people may unintentionally expose themselves to fraudsters and hackers. The hope is that big names in these technologies will provide ample consumer education on the risks new technologies pose as well as basic information on setting up devices securely and protecting sensitive information.
4. It’s not just about increased risk, but more missed opportunities. Merchants who have not upgraded to EMV-compliant terminals will
not only be at increased risk for chargeback liability due to counterfeit fraud, but will be at a disadvantage to the EMV-capable competition when it comes to capturing customers who want to use digital wallets and contactless payments. According to Aite Group, “The formula is simple. No EMV = No NFC = No mobile payments.” That’s a potentially big chunk of revenue to miss out on…

 Parting Words

This year will bring many new opportunities for merchants who remain a step ahead of the payments (and fraud) game. Leveraging new payments technologies requires an agile payments platform fitted with comprehensive and customizable analytics capabilities. It also requires the layering, testing and toggling of a suite of fraud prevention tools that can adapt and grow as new risks emerge. Merchants need to get back to the basics with 3D secure and other industry best practices to protect online payments.
Emerging payments technology and IoT will aggravate risk and online payments fraud as uneducated consumers find themselves unintentionally offering up valuable PII to nefarious characters.  A proactive and thorough approach to fraud and risk mitigation is the best policy this year. Due to the complexities of online fraud and the dynamic payments landscape, working with a fraud and chargeback management partner can make a good business case. Merchants should evaluate their current needs and capabilities and determine the areas in which they may need to augment or completely outsource. Working with a third-party vendor can mean the difference between millions to the bottom line.
Verifi’s Total Chargeback Management solution combines our patented, award-winning Cardholder Dispute Resolution Network™ (CDRN) and Chargeback Representment (CBR) help protect your payments from expensive chargebacks across the entire transaction lifecycle. This comprehensive solution includes a prevention strategy that utilizes real-time notifications to stop unnecessary losses paired with a representment strategy to maximize revenue recovery on chargebacks that make it through. Start 2016 on the right foot and employ a comprehensive fraud prevention strategy that protects payments along every step in the transaction lifecycle.
Don’t forget to download our updated ebook: What Every Card Not Present Merchant Should Know: Navigating Today’s Challenging Payment Ecosystem? Get it now!

A monthly summary of emerging payment trends and forecasts to help you protect your payments and boost your profits

The topic for January’s edition of  Verifi’s PaymentsTips Newsletter is on the question that is top of mind for many merchants emerging into 2016: What is the forecast for EMV sales, post-holiday chargeback implications, and what merchants should look forward to in 2016?
2016 is here already and you can be sure that we will continue to see numerous changes and evolutions in the payments space. From EMV gaining a foothold to fraudsters migrating to the online channel, merchants will need to be on their toes every step of the way. That’s not all bad, either. Digital payments will continue to gain momentum and the Internet of Things (IoT) will grow and expand, providing consumers with more ways to pay. While 2016 forecasts allude to a positive year in payments, merchants should remember that EMV will continue to push fraud online. Starting the New Year with a comprehensive, agile fraud prevention strategy will prove beneficial both now and throughout the rest of the year, as fraud evolves and cyber criminals find new ways to game the system. This month, we’ll look at how the holidays measured up this year and provide you with tips for dealing with pesky holiday chargebacks that seem to linger into the New Year. (Spoiler alert – it’s not too late to prevent and stop chargebacks). We’ll also look at upcoming payments technologies and predictions for 2016, so you can optimize your payments plan and get a layered, comprehensive fraud prevention system in place.

2015 Record-breaking Holiday Sales. Something to Take Note of in 2016.

Black Friday did not disappoint this holiday season. Between doorbuster deals that started as early as 6 a.m. on Thanksgiving all the way through Black Friday itself sales soared, especially online. In fact, the Saturday and Sunday following the booming brick-and-mortar holiday showed an increase in broadband traffic from e-commerce – up 18% on Saturday and 21% on Sunday compared with normal daily volumes. In fact, according to Statista, online revenues in the US totaled $1.66 billion on Black Friday, an increase from 2014’s $1.5 billion.
Cyber Monday kept the pace with a record-breaking ~ $2.98 billion in online sales – a 12% increase from over 2014’s largest online sales day in history. Online shopping was so heavy, even Target’s website had some trouble keeping up and was temporarily down.

Post-holiday Chargebacks Lurk Close Behind Threatening Profits. It’s Not Too Late to Protect Your Profits.

The period between Thanksgiving and Cyber Monday broke online sales volume records in 2015. While this is great news for CNP merchants, it’s also a stressful time of year. The inflated sales volume along with complex and changing promotions and shoppers that are stepping outside of their typical buying habits for the holidays make it incredibly difficult to separate legitimate from fraudulent transactions. No one wants to let more fraud get through but no one especially wants to turn away good customers. Thankfully, there are things merchants can do to avoid the “holiday hangover” that can linger well into the new year.
Using front-end feedback loops can be extremely beneficial this time of year. By using post-billing chargeback notifications, merchants can prevent and stop the chargeback process and resolve disputes directly with consumers, avoiding costly fines and fees. Additionally, many merchants forget that they are leaving money on the table when it comes to revenue recovery. Not all chargebacks can be stopped, but many can be recovered on the backend with the proper representment strategy or solution in place.  
While the holidays brought in record-breaking sales for most merchants, it also brings forth a potential increase of fraud and chargebacks. Most merchants typically face a 50% increase in chargebacks during and after the holiday season, which can eat away at your bottom line. Want to know how you can protect your holiday profits from chargebacks? Read our latest white paper, Millions More Are At Stake This Holiday Season. Are You Claiming Your Share? and get the facts on chargebacks.

 EMV Will Not Be A Silver Bullet For ALL Merchants in 2016. Things You Should Watch Out For.

EMV has been enacted for three full months now, but it has not and will not erase all card-related fraud. In addition to the slow merchant adoption rate (only about 1/3 of merchants are currently on board), the shift will actually push fraudsters online, potentially increasing fraud and chargebacks to card-not-present (CNP) merchants.
The other side of the coin is the cost for merchants who still need to upgrade. Terminals alone can be pricey, depending on the type of reader merchants opt for. One merchant reported the cost of terminals to range between $779 and $999 each – a cost that becomes exponentially expensive depending on the size of the retailer, number of locations and ultimately, number of terminals to upgrade. Not upgrading means bearing a significant part of the fraud losses in the U.S. Annually, card fraud costs the U.S. $8.6 – $10 billion.
Want to know more on EMV and its impacts on your business? Read our latest white paper Count Down to EMV. Are You Prepared? and understand the ramifications of compliance, what new fraud and chargeback threats lay ahead, and what you can do to protect your business. Get the white paper here.

Digital Payments Tipping Point. A Opportunity You Won’t Want To Miss Out On.

Experts predict that digital sales will linger around 8% of retail sales in 2016, with consumer adoption slow in certain segments. As devices become a more prevalent way to pay and consumers get more comfortable parting with plastic for more convenient options, 2020 looks to be the forecasted tipping point for digital payments.
While 2020 is years away, payments leaders are calling 2016 the year that heralds “the third age of digital payments”. As mobile wallet use grows, NFC gains traction and consumers opt for more convenient e-ways to pay, digital will progress. According to one report, alternative payment methods have already eclipsed card payments for the first time, holding 51% of market share.

Parting Words

Pat yourself on the back – you made it through another hectic holiday selling season. The good news is that this season broke records in CNP commerce, signaling to a strong 2016 for online merchants. The better news is that it’s not too late to ensure your payments are protected from costly chargebacks resulting from the peak holiday selling season of 2015. By combining pre-sale and post-sale fraud prevention and recovery tools, you can protect your precious holiday sales and start the New Year off right.
Ask us how our Cardholder Dispute Resolution Network™ (CDRN) can help prevent and STOP chargebacks before they happen as well as provide a feedback loop to inform your front-end fraud control tools. Since chargebacks cannot be completely avoided, our Chargeback Revenue Recovery service provides representment expertise so you don’t leave money on the table. We’ll help you decide when to fight and when to walk away, so you can focus on what’s most important – running your business successfully.
What are your thoughts? Ping us on Twitter (@verifi) with #paymentstips and let us know what you think.
 
 

A monthly forum of  compiled insight from top leading industry thought leaders to help you

protect your payments and boost your profits

Question of the Month

How do I prepare my business for the factors that will impact payments in 2016?

 
We’ve got one more year under our belts and a fresh forecast of things to come in 2016. There is plenty of speculation about what will happen in payments this year but there are a few certainties. First, millennials are standing out as an influential bunch in payments. They love mobile, they’re willing to give up more personal information with the right rewards and they’re tech-savvy. As this group continues to prefer smartphones as a way to pay, mobile will increase in popularity and adoption will grow. This trend will move into emerging technologies as well, with more people using wearables for payments.

Here is what the experts are saying:

1. Millennials are a driving force behind mobile payments. This group has been critical in impacting how companies go to market but they are also influencing how we consume products. It goes without saying that millennials are largely tied to their smartphones, and especially when it comes to using the to pay. About 41% have made a purchase from their smartphone and 52% have used the mobile phone as a payment device at the POS. This could have significant meaning for retailers looking to capture this part of the market, which will require a seamless experience delivered in real-time.
2. Mobile isn’t slowing down. eMarketer forecasts a 210% growth in 2016 for the total value of mobile payment transactions – that’s an increase from $8.71 billion to $27.05 billion. BUT there is still a wide gap between awareness and adoption when it comes to mobile. The key for retailers will be establishing a clear value proposition in the form of meaningful incentives. The days of “rewards” loyalty are gone and a reinvention of these programs will be required to bridge the gap between awareness and adoption.
3. Wearable technology and the Internet of Things (IoT) will pioneer payments. Smart devices and wearables for payments will gain momentum in 2016. While devices like FitBit have already become almost mainstream, we will see additional products like this hit the market with even more agile features. Apple Watch paved the way for wearables in 2015 and 2016 will only see more smart watches and devices released and purchased. This technology also opens to door to increased use of biometrics for payments authentication.
4. Merchants can’t afford security as an afterthought. Between IoT, mobile and wearables for payments, merchants cannot afford to skimp when it comes to securing payments from end to end. Experian’s recent forecast shows that data breaches will not slow in 2016 and it urges business leaders to take note of these trends and adequately protect their business against hackers and threats. The fact is that breaches result in chargebacks downstream, which means that security measures should also include total chargeback management that stops preventable chargebacks and also recovers revenue on the backend. The best solutions utilize merchant-issuer collaboration to facilitate direct communication and resolution of disputes in real-time. Using a vetted Total Chargeback Management solution can give merchants complete protection from all types of chargebacks without turning away good sales.

Parting Words

2016 is slated to be a strong year in payments for merchants who pay attention to trends and proactively approach their business operations based on the information at hand. This will require omni-channel optimization and an agile payment processing operation that is built to meet current requirements and grow with a fast-changing industry. The ability to collect and utilize customer data will be important, but protecting that data will be even more critical. As hackers become shrewder and data breaches show no signs of slowing, merchants need to ensure that their security is up to par and that they have a system in place to prevent and fight chargebacks that may be incurred as a result of data breaches.
Verifi’s Total Chargeback Management solution combines our patented, award-winning Cardholder Dispute Resolution Network™ (CDRN) and Chargeback Representment (CBR) help protect your payments from expensive chargebacks across the entire transaction lifecycle. This comprehensive solution includes a prevention strategy that utilizes real-time notifications to stop unnecessary losses paired with a representment strategy to maximize revenue recovery on chargebacks that make it through. Start 2016 on the right foot and employ a comprehensive fraud prevention strategy that protects payments along every step in the transaction lifecycle.