June 29, 2017
Most of the methods focused on preventing card-not-present fraud introduced since 2010 have been experiencing significant adoption—except one. Of the 20 fraud detection tools examined in a recent report from the Federal Reserve Bank of Kansas City, only 3D Secure adoption has fallen during that time span. But the changing nature of the technology and the changing landscape of e-commerce and payments fraud could require merchants to take a “fresh look,” the report said.
The Fed report acknowledged that a variety of factors—mainly rising online transactions and the EMV implementation in the U.S.—will cause CNP fraud to continue climbing. As a result, while fraud detection and prevention is “in early stages of market development,” merchants are using a growing number of tools.
Old standbys CVN and AVS top the list of techniques used by most merchants. But the fastest growing methods adopted since 2010 are the use of data sources like customer order history and negative lists along with technological solutions including device fingerprinting and behavioral analytics (biometric solutions and two-factor authentication were acknowledged, but are too new to have made an impact yet.)
Only one fraud prevention tool available before 2010 has experienced negative growth. The travails of 3D Secure—especially in the U.S.—are well documented. The requirement for every user to enter a password on every transaction to be authenticated by their issuing bank chased merchants away in droves. But the Fed thinks the evolution of 3DS makes strong authentication a strategy merchants should revisit.
“Card networks recently announced a significant redesign of the 3DS standard to improve security performance and reduce friction of remote purchases,” the report’s authors noted, giving merchants “more control over whether to use 3DS on particular transactions. An e-commerce merchant with strong authentication techniques may gain a comparative advantage of increased customer loyalty.”