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Visa Navigate

October 2022


1 - 2 Minutes

Fighting fraud to help small businesses grow

We are living in the age of true connectivity. Almost every part of our lives is connected to another – and to each other – through technology that has changed the way we consume. By 2025, the number of connected devices is expected to top 75 billion1 – almost 10 devices for every single person in the world.

When we consider this love of screens, be it phones, tablets or TVs, and smart devices such as speakers and home hubs, coupled with the effect of the pandemic, which saw e-commerce volumes grow by 50%, it’s easy to see why more and more small businesses are accepting electronic payments2.

While this surge in digital commerce has undoubtedly been great for small businesses, it’s brought its own unique set of challenges. The convenience of online shopping has increased consumer expectations, with a growing clamour for simple, hassle-free transactions.

But this fundamental shift in our shopping habits has presented more opportunities for fraudsters to target consumers online and steal or corrupt financial data.

So while businesses of all sizes are having to provide quick, easy online shopping experiences, there’s a requirement to provide reliable, robust payment solutions that pack a real punch against cybercrime, and fraud-related expenses.

How do we take the fight to the fraudsters, whilst remaining in the consumer’s corner?

Round 1 – Keep your guard up

The first blow to the criminals was landed in January 2021, when regulators introduced Strong Customer Authentication (SCA) for e-commerce card transactions. SCA requires banks and payment service providers to perform additional checks at the point of purchase to confirm a person’s identity. This could be via a smartphone, a fingerprint, or facial recognition. Payment providers moved quickly in support, by quickly implementing technologies such as Visa 3D Secure (which we’ll touch more on later),

While SCA has certainly made digital transactions safer and more secure for merchants and consumers alike, it’s not been without its teething problems. For one, the extra layers of security involved in SCA can sometimes be frustrating, leading customers to throw in the towel and abandon their purchases, meaning merchants lose out. In fact a 2021 survey showed that European average shopping cart abandonment during payment stage was a massive 44%3.

Then there’s the issue of false declines – legitimate card purchases wrongfully flagged as fraud. Studies suggest that these so-called “false positives” may have cost European merchants upwards of €20 billion in lost sales in 2021 alone4. All this is bad news for small businesses, potentially alienating customers and harming profitability. But there is a solution. And it’s already arrived.

Round 2 – Constantly improving

In response to the challenges, Visa developed EMV 3DS (the latest iteration of Visa 3D Secure) and tokenisation. These pioneering technologies were designed to create a stronger, safer and more resilient ecosystem for small businesses to accept online payments, giving banks and other payments acquirers and issuers the chance to offer these benefits to their customers.

EMV 3DS is a robust, reliable payment protocol, deployed by banks or payment service providers; it’s specifically designed to reduce fraud, with better, stronger detection methods, while significantly increasing approval rates on legitimate transactions, improving overall sales. Plus, as EMV 3DS reduces the likelihood that customers will have to perform additional security steps, it makes for a much quicker, easier checkout experience, resulting in fewer abandonments.

Round 3 – Technical Knockout: bringing tokenisation to the fight

The knockout punch to digital payment fraud came with the introduction of tokenisation. Pioneered by Visa, tokenisation is designed to conceal and devalue sensitive information, making digital payments more secure and helping you and your customers stay one step ahead of the fraudsters.

It works by replacing a 16-digit card number with a digital token that only Visa can unlock. So when customers make a card payment at checkout, their underlying account details are obscured, safeguarding them against fraud. While a stolen card number can be used almost anywhere, a stolen token is useless – like having the wrong key for the lock.

For small business owners, tokenisation provides yet another layer of protection for customers, giving them the peace of mind that their financial data is secure. Our analysis of more than 8,600 issuers and 800,000 merchants, showed that Visa tokens perform at a reduced fraud rate - 3 times less than other payment methods - and a 5% increase in approval rates5. So tokenisation is not just shielding customers from cybercrime, it’s actually increasing sales, and saving money on fraud-related expenses.

Fighting fraud together

Payment providers, regulators and businesses are in the fight together to protect consumers and increase commerce. Providers like Visa are constantly finding ways to innovate, and create robust electronic payment solutions that protect customers from cybercrime, prevent legitimate transactions from being wrongfully declined, and deliver a seamless checkout experience. In turn, by implementing these technologies, businesses and merchants are improving customer experience and brand loyalty, keeping pace with competitors, and ultimately, increasing their bottom line.

As more and more transactions are conducted digitally and without a physical card or payment credential present, it’s more important than ever that consumers and small businesses are protected and given the best opportunities to thrive .

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All brand names, logos and/or trademarks are the property of their respective owners, are used for identification purposes only, and do not necessarily imply product endorsement or affiliation with Visa.

1 Statista (2016) Internet of Things - number of connected devices worldwide 2015-2025 www.statista.com/statistics/471264/iot-number-of-connected-devices-worldwide/
2 Digital Commerce 360 (2022) US ecommerce grows 14.2% in 2021 www.digitalcommerce360.com/article/us-ecommerce-sales/
3  Euromonitor International (2021), Voice of the Consumer: Digital Survey, March
4  Cmspi (2022) Strong Customer Authentication: What UK Merchants Need to Know from the EU Experience www.cmspi.com/eur/en/resources/content/sca-what-uk-merchants-need-to-know-from-the-eu-experience/
5 VisaNet token vs. non-token card not present fraud (March 2022) and authorisation rates (May 2022)

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