Merchant Account Services

3-D Secure Payer Authentication

Learn more about Verified by Visa and MasterCard SecureCode.


Author: Jim Conners ()

Rating: 10.0

Pages: 1|2

Chargeback Blocking.

What the heck is chargeback blocking? It’s exactly what it sounds like. Literally, Visa and MasterCard step in between and block chargebacks from being passed by Issuing bank who issues credit cards to consumers, to the Merchant Acquiring bank, who receives funds for settled purchases from issuing banks on behalf of you the merchant.

What this means is that a chargeback is blocked from ever reaching your Merchant Acquiring Bank. This means that the number of chargebacks that show up on your monthly chargeback report are going to drop – dramatically. Typically by 65-70 percent. When the number of chargebacks drops, the fines for those chargebacks (usually $15-25 each) also go away. In addition, since their was no chargeback, you the merchant can keep the funds for that purchase. The issuing bank again is blocked from pulling the funds for that fraudulent purchase out of your merchant account. Why? Because you have done your part. You have the payer authentication software on your site. You are off the hook for those transactions that are protected. But somebody has to pay for that fraudulent transaction, right? Right. Lets’ read on…

Transaction Liability Shift.

Transaction Liability is the end result of chargeback blocking. If fraud occurs on a transaction, and the merchant is no longer required to reimburse the consumer for that fraud because the merchant was employing payer authentication, then who will? The bank that issue the credit card. Yep. You read that right. All banks that issue Visa or MasterCard credit cards are now liable for all ecommerce transactions that are protected with payer authentication by merchants. When did this happen? Well, it’s actually always been this way with Verified by Visa and MasterCard SecureCode. Now are we starting to understand why the biggest merchants in the world want these programs on their websites?

So why would issuing banks allow this to happen? Aren’t they now exposed to a huge amount of fraud? That’s partially true, but banks, as members of Visa and MasterCard, are bound by the rules of the card associations they are members of. Also, issuing banks realize in the long run, these programs will strengthen the brand of their cards, and make consumers more willing to shop online. And as you know, issuing banks love it when you use your credit card.

The ecommerce channel today represents only 2-3 percent of the overall commerce in the U.S. However, it is the fastest growing payment channel. Issuing banks realize that ecommerce is really still in it’s infancy, or maybe now more like a toddler. It’s learning to walk, but its still stumbling around like a drunken sailor trying to get his sea-legs. It may not be perfect, but it’s getting better, and becoming ubiquitous. Pretty soon it will be so big, it will be too big to fix, so banks are willing to scrape their knees a little now, and get the problems fixed. When ecommerce eventually is 5, 10, 20, or 50 percent of US commerce, consumers will feel good about using their credit card to shop online, and not be afraid of identity theft and fraud.

Accept International Transactions.

Do you accept transactions today from Nigeria? No? Not surprising. Nobody does. However, what about Canada, or Mexico, or England, or Germany, or Australia, or Japan. There are most certainly customers in these and many other countries that we would be happy to do business with, if we only could feel safe about accepting the transaction. But there’s no Address Verification System (AVS) for these countries, so what can we do?

Well, if you enable Verified by Visa/MasterCard SecureCode on your ecommerce site, not only can you accept transactions from these countries and all over the world, you can do so with exactly the same benefits and protections that you get on U.S. issued credit cards.

A conservative approach for a merchant who is hesitant to test the international markets may be to simply offer to accept international orders ONLY if they are made with a Verified by Visa or MasterCard SecureCode credit card. That seems fair enough. Talk about expanding your markets!

Reduce Overall Cost of Doing Business (operational overhead).

This benefit probably takes the longest to realize, but can be pretty substantial. Ask yourself this question: How much manpower, time and resources do I spend preventing/screening transactions for fraud, and dealing with chargebacks that I have received? Whatever the answer is, now cut that manpower, time and resource allocation by 60-70 percent, and that’s what payer authentication has to offer your business in terms on reducing your costs of doing business.

Verified by Visa and MasterCard SecureCode make your business more efficient. They reduce the time you spend as a business trying to be a security expert, and give you more time and resources to focus on selling your products, which is what a “merchant” should be doing. It’s a beautiful thing!

Verified by Visa Chargeback Reason Codes Covered

U.S. Visa Credit and Debit Cards – Full & Attempted Authentication

  • 23: Invalid Travel & Entertainment
  • 61: Fraudulent Mail Order/Telephone Order/eCommerce
  • 75: Cardholder does not recognize transactions

Visa International Credit and Debit Cards - Full & Attempted Authentication

  • 23: Invalid Travel & Entertainment
  • 83: Fraudulent Mail Order/Telephone Order/eCommerce

MasterCard SecureCode Chargeback Reason Codes Covered

U.S. MasterCard & Maestro Cards – Full Authentication

  • 4837: Cardholder non-authorization
  • 4863: Cardholder not recognized

Which merchants can benefit the most from these programs?

If you accept credit cards as payment online for merchandise, then you can benefit. It does not matter if you are a small business run out of your basement, or if you are selling millions of dollars a year in merchandise. Every merchant can benefit from these programs. More specifically, merchants that are in high risk categories for fraud: jewelry, consumer electronics, software, DVDs; merchants whose items can be easily pawned or fenced: sporting goods, tools, tobacco, ticketing; merchants who sell ‘soft’ products: games, music, content, airtime/phone minutes

So where can I go to get this software?

Visa and MasterCard both have published vendor lists on their websites. You should also talk to your Merchant Acquiring Bank, your Payment Gateway, and/or your Payment Processor to find out if they already have a vendor that they recommend or are partnered with.

Valuable Resources

Verified by Visa Merchant Information Site
Verified by Visa Consumer Information Site
MasterCard SecureCode Merchant Information Site
MasterCard SecureCode Consumer Information Site

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