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Electronic Merchant Services
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MASTERCARD DELVES INTO NETWORK DATA, DARK WEB TO FIGHT FRAUD

While retailers and issuers have been ever at odds over various matters, fraud prevention is one issue that affects them both. Mastercard yesterday launched a tool for its issuers that it said will help predict card fraud in a faster and more targeted way.

As we continue to learn about massive hacks like the recent one at Equifax and, just last week, Sonic restaurants, consumers’ personal and payment card information is increasingly at risk. In fact, Mastercard research found it can take as little as nine minutes after being posted on the dark web for stolen information to be used in a fraudulent online transaction. Source - Card Not Present .com
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IPHONE X TAPS FACIAL RECOGNITION FOR PAYMENT AUTHENTICATION

Depending on how many people can get past the four-figure price tag, facial recognition for payments could be getting its first significant field test in the newly released iPhone X from Apple. Apple’s Touch ID was introduced on the iPhone 5s in 2013 and has become the go-to authentication method for Apple owners to unlock their phones, access protected apps and make online purchases using Apple Pay. The iPhone X, unveiled on Tuesday, has abandoned the Home button and, consequently, abandoned fingerprint authentication that relied on it.
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VISA TO LAUNCH STORED CREDENTIALS PROGRAM NEXT MONTH

Beginning Oct. 14, 2017, Visa will unveil a new set of requirements for any business that stores cardholder payment information to enable faster future online checkout. Merchants that store payment information or tokens for a future purchase—whether for a recurring charge, a future single purchase, a delayed charge or to top up an account—will be directly impacted and the time to prepare is now.

A “stored credential” is defined by Visa as “information (including, but not limited to, an account number or payment token) that is stored by a merchant or its agent, payment facilitator, or staged digital wallet provider to process future purchases for a cardholder.” Source: Card Not Present .com
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U.S. Mobile Wallet Usage Tripled Since 2014

Card-not-present merchants that are not equipped to accept mobile-wallet payments may want to finally get on board. While payments experts have been predicting a "tipping point" where mobile wallets become ubiquitous in the U.S. for many years, it has largely been an Asian phenomenon. A new report, however, said that while Apple Pay may not be shattering adoption records, it has had a significant effect on mobile wallet adoption overall and that U.S. and European consumers are catching up to their Asian and Latin American counterparts in the use of mobile wallets, both in stores and online. Source Card Not Present . com

Seventeen percent of U.S. consumers regularly use their smartphones to pay, up from 6 percent in 2014, according to research from ACI Worldwide and Aite Group. Driving the surge, according to Global Consumer Survey: Consumer Trust and Security Perceptions, is the conversion to payment-enabled devices that is nearly complete as older smartphone models are cycled out and consumers buy new ones.
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Visa Upgrades Verified by Visa to Support 3DS 2.0

As online transactions grow and personal information stolen in data breaches proliferates, accurately authenticating the identity of online shoppers has become more important than ever for merchants. Visa on Tuesday announced plans to support 3D Secure 2.0, the evolution of a decade-old authentication technology many merchants have been leery of using. Source: Card Not Present .com
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MOBILE CARD TRANSACTIONS SAFER THAN DESKTOP

From 2016 to 2017, the number of merchants that accept card-not-present transactions via the mobile channel increased, but, as a percentage, the number of companies that track fraud in that channel has decreased, according to a new report. CyberSource’s annual online fraud benchmarking report found that 61 percent of merchants support m-commerce, up from 52 percent in last year’s survey. Those that specifically track the fraud originating from mobile transactions fell from 52 percent last year to 49 percent this year.

CyberSource found that mobile transactions are safer, overall, than desktop and laptop transactions. Merchants polled reported they lost .9 percent of their revenue to fraud from their Web stores compared to .8 percent fraud losses in their mobile channel. But, as mobile transactions continue to grow, they become a more inviting target for fraudsters and the techniques used to prevent e-commerce fraud may not be entirely effective against m-commerce fraud. Source: Card Not Present.com
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SUPREME COURT PASSES ON INTERCHANGE RATES

The U.S. Supreme Court had a chance to finally rule on the decades-long battle between retailers and banks over interchange, but decided to pass on the opportunity, leaving in place a lower-court decision to set aside a $5.7 billion settlement. Merchants have been fighting the settlement almost since the day it was approved in 2013 after nearly a decade of negotiations. The result, according to observers, is continued uncertainty over the cost of credit card acceptance and the continuation of a seemingly endless standoff between merchants and issuers.

“If this settlement had been approved, the structure of fees that drive up the prices of everything consumers buy would have been cemented into place forever,” said Mallory Duncan, senior vice president and general counsel for the Washington, D.C.-based National Retail Federation, in a statement. “Now something can finally be done to bring these fees under control.”

The settlement originally totaled $7.25 billion in July of 2012 when it was first negotiated, but merchants began opting out when they found they would be giving up their right to pursue further legal action forever. After the final approval, merchants still in the settlement appealed, as did the card networks. The case now goes back to federal court in Brooklyn where the parties will try to work out a new agreement. Source: Card Not Present .com
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CHARGEBACKS - WHAT YOU NEED TO KNOW
When you think of threats to your online business, you probably think of price-cutting competitors and negative customer reviews. There’s another threat you may not know much about: chargebacks. Card companies allow customers to make refund requests to protect them from fraud, but 86% of chargeback requests are “friendly fraud.” That means the customer bought something and then claimed they didn’t make the purchase or never received the goods. The merchant is left holding the bag.

If you think this is rare, think again. Friendly fraud costs retailers more than $11 billion per year and it can cause small businesses to fail, often before the owner knows there’s a problem. What exactly are chargebacks, and how can you fight them?

When can a customer request a chargeback?

Each card company allows chargeback requests for dozens of reasons. For example, Visa’s Reason Code 83 indicates the customer claimed “fraud in a card-absent environment,” while Reason Code 30 is for claims of merchandise not received. There are other reason codes that fraudsters abuse, and unless you can prove that their claims are false, your business will suffer.

What happens after a customer chargeback request?

If you get a chargeback notice or a request for more information from your acquiring bank, respond quickly so you don’t lose your chance to dispute the chargeback. Send your acquirer the documentation that proves the customer did make the purchase and received it. Transaction data in addition to the receipt—like the customer’s email, IP address, and order history—as well as shipping, tracking, and delivery confirmation, are the keys to winning these disputes.

If you lose your appeal or don’t contest the chargeback, you are required to issue a refund. Your business also loses any physical goods that you shipped and pays a chargeback fee of anywhere from $20 to $100 per transaction.

How fraudulent chargebacks hurt businesses over the long term

The real risk isn’t the immediate financial hit. It’s the risk of losing your business. That risk begins to grow as soon as fraudsters discover your business is vulnerable, because they may target you for purchases that are more expensive and share your shop information with other criminals. The subsequent rise in chargebacks will negatively affect your chargeback ratio.

Banks and card companies monitor the number of chargebacks your business incurs compared to your total number of transactions. The high-risk threshold varies by industry, but if your chargeback ratio reaches or passes that limit, your account will be branded “high risk.” At best, that means you’ll pay more for payment processing. At worst, your bank will no longer do business with you, something many novice merchants learn the hard way.

In these cases, the bank adds the business to the industry’s MATCH list, where the information stays for up to five years. This listing makes it very expensive or even impossible to open another merchant account during that time. Preventing chargebacks is a must for businesses that want to survive.

How can businesses reduce their chargeback risk?

To cut down on legitimate chargebacks, good communication is key. Your product descriptions, refund and return policies, and customer service contact information should be easy to find on your Website and easy to understand. Your customer service team should respond quickly to customer questions and refund and exchange requests.

Proper record keeping is important. For each card network you participate in (Visa, MasterCard, etc.), you need to know the chargeback codes and documentation required to dispute chargebacks successfully.

To prevent fraudulent chargebacks, your business needs to weed out fake orders from valid ones without slowing down order processing or alienating good customers. This requires knowledge of fraud methods, high-risk billing and shipping zip codes, fraudulent card numbers and identities, the types of purchases that can signal fraud, and more. Even shipping speed can be a flag for possible fraud, depending on the type of purchase and the customer’s purchase history. On top of all that, fraud indicators and risks are constantly evolving as criminals refine their methods.

Because the indicators of fraud are complex and dynamic, DIY fraud screening can be time-consuming and ineffective. Some business owners opt to approve some orders in-house and send flagged orders to an outside service for verification. These businesses are still vulnerable to chargebacks on orders approved in-house, while their outside fraud-prevention service gets an incomplete dataset to improve and customize fraud protection. Other businesses turn all their order screening over to an outside fraud prevention service that also assumes responsibility for any chargebacks, to save time, save friendly fraud costs, and get better protection over time built on a complete transaction dataset.

Whatever fraud-prevention path you choose for your business, review it regularly to see how it’s performing, whether your chargeback ratio is rising or falling, and how much time and money you’re losing on disputes and chargebacks. These numbers will let you know if your current solution is working or if you need to find a more effective way to fight fraud and stop chargebacks. Source - Card Not Present .com
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30% OF CREDIT CARD TRANSACTIONS FLAGGED AS FRAUD ARE GOOD

There’s an axiom in the CNP fraud prevention world: It’s easy to completely eliminate your fraud; just don’t take any orders. The line is tongue-in-cheek, but card-not-present merchants increasingly are more concerned with declining legitimate orders than they are with preventing fraudulent orders. According to Portland, Ore.-based payments and antifraud technology provider Vesta, these merchants have good reason to have shifted their perspective. Nearly one-third of all transactions declined due to suspected fraud are legitimate, the company found in recent research. These “false positives” (named such because a fraud-prevention system has incorrectly flagged them positively as fraud) not only result in a lost sale, but can also send a loyal customer to a competitor—perhaps never to return.

“A merchant’s default position, once they feel like they are being targeted by fraudsters—and it’s human nature—is to tighten their fraud filters all the way down. But, you’re hurt if you do and hurt if you don’t,” Tom Byrnes, CMO at Vesta, told CardNotPresent.com. “How do consumers react to this? Did you just lose that transaction or did you lose a customer?”

Byrnes said an emphasis on controlling false positives can add to a business’s operational costs—especially if it offers digital goods.

“The problem is, you’re dealing with instant, sub-second decisioning and fulfillment. Once you decision, you’re fulfilling,” he noted. “That adds a different dimension to the operational landscape for a merchant’s fraud shop. Now you have to add different kinds of technologies—device fingerprinting or out-of-band authentication, for example. But, that’s adding layers and merchants have to decide if they are going to invest in those things.” - Source Card Not Present .com
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EMV's FALSE SENSE OF SECURITY IN MERCHANT SERVICES

When the U.S. shifted to chip card technology, the goal was to lower in-person credit card fraud. However, the shift may be off to a rockier start than originally anticipated. While the EMV transition helped cut in-store fraud for consumers in 2016, it unintentionally spiked online fraud.

Now, chip cards have given consumers a false sense of security, not factoring in that the chip can do nothing to protect online purchases. Online merchants have put their necks on the line more than anyone, and the need to overcompensate for the false sense of security on top of regular anti-fraud checkpoints is vital. At best, a good processor can handle all the back-end technology and make sure every transaction is secure, smooth and streamlined. At worst, a bad processor can compromise your entire company. Do your research before you sign any contracts.

If you want to take a more traditional route, there’s also the option to go with a service like PayPal or Square to ensure security. However, with these services, customers won’t complete the sale on your website, but rather on the third-party site.

Plus, if you’re ever having any issues with transactions, customer service might not be as efficient as if you chose a smaller company.

Once you’ve found an effective processor, consider your verification process. The first step comes from PCI compliance and firewalls.

If customers have an account on your site, make sure you have multiple requirements for passwords. Remember that it’s not just your customers’ information as stake; a fraudulent transaction could be a major cost for your business too, with extreme cases ending in bankruptcy or close of business.

If you’re still stuck on ways to increase security measures, or you want to know more about how chip cards affect your online transactions, talk to your payments processor about options. Source - Payments Source .com
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