As predicted, a steady increase in the number of card-not-present transactions combined with the U.S. EMV implementation making card fraud in stores more difficult has led to significant growth in CNP fraud around the world. While the problem is particularly acute for merchants, which bear the liability for the cost of fraudulent transactions, issuers bear costs associated with increasing fraud rates as well. Toronto-based Ethoca has been at the forefront of an effort to unite the concerns of merchants and issuers on this matter by establishing a collaborative network that attempts to alert merchants to cases of confirmed fraud before they become chargebacks, which affect the revenue of both constituencies.
The company, which recently released a report examining the problem of false declines that can stem from overly stringent antifraud efforts, last week unveiled a partnership with data analytics firm FICO that will enable more merchants to become part of its network. Under the agreement, issuers that use FICO’s Falcon Fraud Manager solution can connect to and automatically alert merchants on Ethoca’s network when one of its cardholders confirms a fraudulent transaction. When merchants are able to intervene with a consumer before the dispute becomes a chargeback, all sides can reduce costs and merchants are able to preserve their relationship with their customers.
“This first step in our partnership gives card issuing banks access to the largest card issuer-merchant collaboration network in the world,” said Robert Duque-Ribeiro, vice president and general manager for Fair Isaac Advisors at FICO. “That means they are now able to recover issuer-liable fraud losses like 3D Secure transactions and low-value transactions they would normally write off, while making the recovery of merchant-liable CNP fraud transactions faster and much more cost-effective.”