Connect with us

News

CAN NETWORK TOKENIZATION LIMIT FALSE DECLINES?

Andre Stoorvogel, Director, Product Marketing, Rambus Payments

With retailers expected to lose $130 billion to online fraud over the next five years, there is increasingly urgent demand for tighter solutions and greater protection for both consumers and digital commerce merchants.

But in the scramble to combat fraudulent activity, the industry has created an arguably greater challenge – false declines.

What is a false decline?

Andre Stoorvogel

Around two billion card not present (CNP) purchases are declined each year, and transaction approval rates for digital transactions stand at around 85%, compared to 97% for in-store transactions.

This is not necessarily a bad thing, as cards are often declined due to the cardholder having reached their spending limit. Similarly, other transactions are declined when a fraudster is accurately detected.

The problem comes when a genuine customer within their spending limit tries to make a purchase…and still gets declined. This is known as a ‘false decline’ (or sometimes as a ‘false positive’). We know that false declines are a big problem, with US e-commerce merchants losing a total of $8.6 billion to declines, compared to the $6.5 billion of fraud they are actually preventing.

And the true cost of false declines goes beyond the initial sale. We also need to consider the wasted cost of acquiring the customer (through advertising and promotions), as well as the lost lifetime value of a potentially loyal customer.

What causes false declines?

If you are a consumer, the answer is probably ‘I don’t know’. To protect privacy and to prevent fraudsters trying to reverse-engineer the fraud logic, error messages explaining why a transaction has been declined are often deliberately vague. This compounds frustration, particularly when it is a loyal customer that is rejected.

Often the causes of false declines fall into two main categories: identity and structural.

Identity-related false declines are often caused by something very simple, such as a mismatched billing and shipping address or outdated card information. Outdated card information is a particular challenge for merchants where consumers make infrequent, high-value purchases (such as airlines). For example a survey found that for one airline, over half of all declines were due to an incorrect expiry date or CVV2 code.

Separately, ‘structural’ false declines typically account for around 40% – 60% of rejected purchases, and are caused by the measures and parameters put in place by fraud management software. By being overzealous with their fraud prevention, merchants run the risk of creating too much friction, resulting in unhappy customers and lost sales. Equally, playing fast and loose increases the threat of genuine fraud as well, which can be equally as damaging.

Can network tokenization reduce false declines?

With network tokenization, the payment networks replace a primary account number (PAN) with a unique EMV®* payment token that is restricted in its usage, for example, to a specific device, merchant, transaction type or channel.

Network tokenization reduces the risk and impact of genuine fraud by protecting card details throughout the entire transaction lifecycle.

But it can also reduce instances of false positives. Merchants that took part in network tokenization pilots conducted by payment networks have reportedly stated a false decline reduction between 5-8%.

As card details are automatically updated and refreshed, for example, the chance of outdated or mismatched data triggering an identity-based false decline on the system is limited.

Also, tokenized transactions are viewed as inherently more secure so are less likely to be classed as risky enough to be declined. The trust and confidence delivered by the end-to-end security proposition of network tokenization enables merchants to relax overly-stringent fraud controls and assume that a transaction is legitimate, without declaring open season for fraudsters.

A foundation of online commerce 

Given the scale and immediacy of the false decline challenge, advances are undoubtedly being made to improve security techniques and enable more intelligent risk decisioning.

Yet, ever-increasing fraud prevention spending is failing to contain an escalating problem. It is clear, therefore, that a foundation of secure trust is needed. This is where network tokenization comes to the fore, enabling merchants to strike the balance between security and convenience.

For more information on network tokenization, visit the Rambus Payments Resource Library.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

News

VIBEPAY SETS SIGHTS ON GROWTH WITH INTEGRATION OF MORE UK BANKS AND NEW BUSINESS ACCOUNTS

VibePay is continuing on its ambitious path of growth, with the integration of more UK banks and payment providers via open banking, and a business account function in its newly launched social payments app.

With 24 banks now integrated with the app, including new additions Starling, Capital One and Tesco, VibePay is aiming to boost engagement with its 50,000 users and drive more sign-ups amongst its Gen Z audience.

The addition of business accounts for the first time will open up VibePay to a small business audience and appeal to the many Gen Z-ers who earn money from selling on their social channels or platforms like Depop. This functionality will enable them to make and receive payments with no fees and provide instant access to funds and a transaction dashboard to track their payments.

 

The new app will see further functionality added over the next few weeks including:

  • Vibe.me links, giving all users a personalised payment URL
  • Vibe ID – an ‘online passport’ allowing users to link their bank account and seamlessly transact and interact with brands across the web
  • QR codes, to scan for instant payments
  • Vibe Shop – a new way to buy Vibe merchandise via pay with bank functionality
  • Integration with VibeTickets, allowing its 100,000 users to make payments via VibePay with no fees

 

Luke Massie, founder of VibePay, says“This new app is the culmination of months of work – we’ve taken invaluable feedback from the VibePay community and looked at how we can make the app bigger and better so it’s easier, more fun and an indispensable tool for our users’ lives.

 We’re built for Gen Z by Gen Z which means we’re able to reach this critical audience with a unique solution built on their lives. We can’t wait to roll out the new functionality over the coming weeks and see our community continue to grow. We’ve already got our sights set on the next phase of growth for 2020 and beyond.”

 

Continue Reading

News

BOARD REPORT HIGHLIGHTS COMPLEX DECISION-MAKING PROCESS ACROSS BANKING AND FINANCE SECTOR

‘The State Of Decision-Making’ report from Board, reveals business decisions made in silos without modern planning tools

A third (33%) of Banking & Finance decision-makers believe decisions made in silos, despite majority (63%) of decisions being implemented worldwide

More than half (57%) of Banking & Finance decision-makers rely on spreadsheets for decision-making despite modern planning tools now available

 

Board, the #1 decision-making platform, has today released ‘The State Of Decision-Making’ report focussing on how UK organisations make their important business decisions.

Based on a survey of 500 senior decision-makers, across industries including, Banking & Financial Services, Consumer Goods, Manufacturing, Pharmaceutical, Professional Services, Retail, and Transport & Logistics,  ‘The State Of Decision-Making’ report from Board shows that today’s business decision-making process is increasingly complex, with multiple departments and seniority levels all responsible for some form of decision-making, leading to a lack of cohesion between units and a waste of business resources.

 

The State Of Decision-Making’ research found that while a clear majority of respondents (63%) working within the banking and finance sector say the important decisions they are responsible for get implemented globally, the decision-making process itself is not joined-up across the business, with one third (33%) also saying that crucial business decisions are made in departmental silos.

 

The research, conducted on behalf of Board International by independent research organisation 3GEM, also asked respondents the tools they use to make decisions and, while almost every action within an organisation today will lead to the creation of new data, it seems many businesses are not using the crucial insights which data can provide to make important decisions.

 

More than half (55%) of respondents in the banking and finance industry said they were making business decisions based on data and insights, but ‘gut feeling’ decisions are still made by up to 44% of companies. What’s more over half (57%) of the sector’s companies still rely on spreadsheets to aid their decision-making, despite more modern and reliable tools now available.

 

“In today’s fast-paced, data rich and evolving business environment, making quick and effective decisions is critical to both compete and survive,” explains Gavin Fallon, Managing Director for UK, Nordics & South Africa at Board International. “Important decisions are being made at any one time across multiple business functions, but all too often, important decision-making is disconnected, modular or fragmented.”

 

The research also asked respondents about the challenges banking and finance decision-makers face at their organisation,  with nearly a third (29%) citing a lack of available data and insights and one quarter (25%) citing the fact there are too many people in the decision-making process as their biggest frustrations. However, industry decision-makers believe that the process can be improved with the introduction of new technology, with the majority (57%) of respondents saying this would make their decision-making better, while 41% also felt increased use of data and insights would help.

 

“Businesses have to plan every day for a far more uncertain future and set themselves up to prepare for change and keep changing against the backdrop of a more volatile and uncertain marketplace than ever,” continues Fallon. “A bad decision can have wide-ranging impact across the whole organisation and no business can afford to waste time and resources on bets that may or may not come off.  As the business environment increases in complexity, the ability to not just react, but predict, in real-time, becomes more important than ever.”

 

Continue Reading

Magazine

Partner Events

Trending

Business21 hours ago

WHY AUTOMATING CAN FUTURE PROOF YOUR BUSINESS

By Ryan Demaray, Managing Director SMB EMEA at SAP Concur   Every business has administration duties that can be considered...

News21 hours ago

VIBEPAY SETS SIGHTS ON GROWTH WITH INTEGRATION OF MORE UK BANKS AND NEW BUSINESS ACCOUNTS

VibePay is continuing on its ambitious path of growth, with the integration of more UK banks and payment providers via...

Banking21 hours ago

HOW BANKING IS USING AI TO PROCESS CUSTOMER FEEDBACK

By Dan Somers, CEO of Warwick Analytics   More banks are turning to practical AI to rapidly analyse customer conversations...

News21 hours ago

BOARD REPORT HIGHLIGHTS COMPLEX DECISION-MAKING PROCESS ACROSS BANKING AND FINANCE SECTOR

‘The State Of Decision-Making’ report from Board, reveals business decisions made in silos without modern planning tools A third (33%)...

Business21 hours ago

COULD GRAPH TECHNOLOGY BE A POWERFUL WEAPON AGAINST CORONAVIRUS FRAUD?

Crisis funds and loans put in place to help support businesses during the health emergency have become a prime target...

News22 hours ago

THOUGHT MACHINE JOINS THE BANKING INDUSTRY ARCHITECTURE NETWORK (BIAN)

Thought Machine, the cloud native core banking technology firm which builds Vault, today announces it has joined the Banking Industry Architecture...

Wealth Management4 days ago

DON’T RISK IT ALL WITH NON-COMPLIANCE

By Paul Sleath, CEO at PEO Worldwide   Did you know non-compliance costs more than twice the cost of maintaining or...

News5 days ago

BANKIA TRANSFORMS THE CUSTOMER AND EMPLOYEE EXPERIENCE WITH BIANKA BY IPSOFT

Developed with cognitive artificial intelligence, IPsoft’s conversational agent can carry out transactional tasks, perform different roles in customer service and...

Finance5 days ago

FIDUCIARY MANAGEMENT

by Devan Nathwani, FIA and Investment Strategist at Secor Asset Management   Defined Benefit pension schemes are one of the most significant institutional...

Business5 days ago

TOUCH-FREE AUTHENTICATION FOR ALL: WHY WE NEED A SAFER PAYMENT METHOD IN THE ‘NEW NORMAL’

David Orme, SVP, Sales & Marketing, IDEX Biometrics ASA   Ever since March, when the World Health Organization encouraged people to...

Banking5 days ago

WHY BANKS NEED TO EMBRACE OPEN SOURCE COMMUNITIES

Nikolai Stankau, Director Business Development, EMEA Financial Services at Red Hat, the world’s largest enterprise open source solutions provider.  ...

FINANCIAL MARKET FINANCIAL MARKET
Wealth Management5 days ago

FOR PE TO SNAP UP “GOOD” COMPANIES, THEY MAY NEED TO WADE INTO “BAD” ECONOMIES

By  Martin Soderberg, Partner at SPEAR Capital   There’s no shortage of global challenges for investors currently, especially for those...

Business6 days ago

THE BASICS OF BUSINESS FINANCE

When you’re starting your business, you’ve got a lot to be thinking about. You need to find affordable suppliers, market...

Business6 days ago

HOW THE IMPORTANCE OF E-COMMERCE PLATFORMS GREW DURING THE PANDEMIC

Never in history has the world relied more on the internet than during this Covid-19 pandemic. With governments imposing lockdowns...

Business6 days ago

UNBANKED AND UNCONNECTED: SUPPORTING FINANCIAL INCLUSION BEYOND DIGITAL

Darren Capehorn, Director, Icon Solutions   Many of us take it for granted, but accessing basic financial services is fundamental...

Banking1 week ago

MORE THAN REGULATION – HOW PSD2 WILL BE A KEY DRIVING FORCE FOR AN OPEN BANKING FUTURE

Ralf Ohlhausen, Executive Advisor, at PPRO   Whilst initially seen as simply a regulation exercise, the second Payment Service Directive,...

Top 101 week ago

TIME TO THINK OUTSIDE OF THE BLACK BOX

Mike Brockman, CEO, ThingCo   If you have the unbridled joy of parenting a teenager you’ll probably know what telematics...

Banking1 week ago

BANKING’S SECOND WAVE OF TRANSFORMATION: INTEGRATING THE CLOUD-ENABLED FUTURE BANK

Keith Pearson, Head of Financial Services EMEA, ServiceNow   The last six months have seen significant changes to the financial services landscape, with operational resilience, economic recovery, cost reduction and an...

News1 week ago

RISK AND INVESTMENT SPECIALIST, CARDANO, TAKES TO DOCUMENT AND EMAIL MANAGEMENT IN THE CLOUD WITH ASCERTUS AS IMPLEMENTATION PARTNER

Ascertus also providing document comparison tool, compareDocs    Cardano, a privately-owned, purpose-built risk and investment specialist, has chosen Ascertus Limited as its implementation...

Wealth Management2 weeks ago

HOW SALARY SLIPS HELP YOU UNDERSTAND TAX DEDUCTIONS ON YOUR SALARY

A salary slip is defined as a document that is provided by your employer which contains the breakdown of your...

Trending