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EMV® 3DS – PAVING THE WAY FOR SEAMLESS AUTHENTICATION

3DS

Jean Fang, Product Manager, FIME

 

The growth of e-commerce, m-commerce and remote commerce transactions is showing no signs of slowing down. In 2021, over 2.14 billion people worldwide are expected to buy goods and services online, up from 1.32 billion in 2014. The growth of card-not-present (CNP) transactions has driven a new age of consumer convenience but in parallel, a new age of fraud.

As EMV®* chip card adoption gathers momentum, with 76.7% of card-present transactions being EMV, fraudsters are looking for an easier way in. And the stats speak for themselves – digital fraud rates now account for 60-70% of all card fraud in many developed countries. In fact, it was even estimated that the gains made from savings in card-present fraud were eclipsed in 2018 by the losses from CNP fraud. This is not only affecting approval rates but also all-important consumer trust. So, what can be done? EMV 3-D Secure – EMV 3DS for short – is one solution that’s leading the way in the CNP ‘catch up’.

 

What is EMV 3-D Secure?

EMV 3DS is a messaging protocol used to identify and verify cardholders for CNP transactions. The specification improves communication between the issuing bank, the acquirer and the merchant. By doing more work ‘in the background’, it’s able to streamline the user experience, improve approval rates and reduce fraud. These features allow it to offer a frictionless online authentication solution.

The first version of the messaging protocol was initiated by Visa and was quickly followed by other international payment schemes. This was a fragmented and complex solution for the industry, however. Now, industry body EMVCo has taken ownership and is managing the evolution of the specifications.

 

Jean Fang

What’s new?

The latest version of the EMV 3DS specifications includes new features to address the pain points of the old protocol. These improvements aim to deliver consumers a much smoother experience and keep transactions safe from new techniques employed by fraudsters. Let’s take a look at the new features and how they can improve the digital retail experience.

More authentication options

One of the new features set to enhance the consumer experience is the support for biometric technology that consumers have gained access to recently. Many shoppers are now familiar with a variety of biometric authentication methods, such as facial and fingerprint recognition. For some it is still a novelty to pay using your face, but this doesn’t mean it’s not a priority; it’s predicted that we’ll see nearly 90% of businesses using it by 2020.

The act of replacing ineffective static passwords with more complex authenticators is much more secure and user-friendly. Implementing support for these methods of authentication can help merchants with their aims to reduce cart abandonment. 28% of U.S. online shoppers have previously admitted to quitting orders due to checkout processes being too long or complicated and 17% said that they have abandoned checkout because they didn’t trust the website with their credit card information. Therefore, striking the right balance between convenience and security is fundamental.

More choice

The increase of choice isn’t just limited to more authentication options than before. Another new feature of the latest version of EMV 3DS enables both customers and merchants to have greater input. Customers will be able to ‘whitelist’ merchants with their issuer when setting up, say, a recurring purchase. This lets banks know a full review is not required, reduces customer prompts and can help support banks in risk ‘scoring’ merchants.

By feeding more data elements collected from the shoppers to the issuers, merchants can further improve the frictionless transaction experience. This increase of choice for customers, merchants and issuers benefits all parties, as it gives customers an easier experience and provides valuable customer data that can be used to inform the development of new services.

Non-payment categories

Another feature that has been added to the latest version of EMV 3DS is the support for new use cases, including identification and verification applications, as well as payments. While these use cases are still being explored and defined, they could include features such as being able to add a new payment card to a mobile wallet and open a new account online. And it’s not just consumer use-cases that are being explored. In the future, EMV 3DS could even be used by governments to authenticate citizens.

Alignment with new regulation

Simplifying alignment with regulatory requirements is another major bonus of EMV 3DS, especially with an increasing number of countries mandating multifactor authentication in CNP environments. Take Europe’s PSD2 and the strong customer authentication (SCA) mandates, for example. Implementing EMV 3DS offers banks an opportunity to utilize the same infrastructure to process SCA as well as EMV 3DS transactions. With more data included in the message requests, indications such as whether Acquirer SCA or a transactional risk analysis (TRA) have already been performed, or if a customer utilized a FIDO authenticator, can simplify the authentication process.

 

Next steps to implementation

Wherever in the online payments chain you sit, EMV 3DS is a compelling authentication solution fit for the omnichannel age, especially now it includes these new elements. But, as with any major system upgrade, implementation does not come without its challenges and testing requirements.

Before embarking on an EMV 3DS project – whether an entirely new system or upgrading a legacy system – there are three key stages of testing to consider: functional, security and integration with payment schemes.

Understanding what scope of testing falls to each stakeholder and navigating the three stages quickly and cost-effectively can be a challenge. And it’s here where support from a reliable testing and consulting expert on EMV 3DS can be invaluable.

To learn more about the key considerations and challenges when migrating to EMV 3DS, read our eBook.

*EMV® is a registered trademark in the U.S. and other countries and an unregistered trademark elsewhere. The EMV trademark is owned by EMVCo, LLC.

 

News

NEW TECHNOLOGY PLATFORM REDUCES CLAIMS PROCESS FROM WEEKS TO MINUTES

New platform has potential to cut fraudulent claims by almost half Decrease claims costs by as much as two thirds

 

Pact Global, an insurtech business, has launched an Artificially Intelligent (AI) Claims as a Service (CaaS) platform to help the General Insurance market significantly reduce fraud exposure, accelerate the claims process, enhance customer insight and significantly reduce the overall cost of handling a claim by up to 66%.

 

Mark Seddon, Founder and CEO of Pact, says what currently takes days or weeks to complete, can now be managed in minutes: “Our platform is better for the customer, as it makes the claims process much faster and easier, and also much better for the insurer, as it automates the whole process and minimises the time spent on claims management, a significant cost to the business.”

 

Focussing currently on travel, motor and property insurance, all Pact’s offerings use more than 50 separate data points during the claim validation process to verify the customer’s contact details and investigate their claims history.

 

Verification is supported by the use of AI, behavioural analytics, assisted intelligence and a purpose-built, face and voice recognition program. Employed at the First Notification of Loss (via a white labelled customer mobile and web app), it confirms the customer’s identity and detects whether expressions/behaviours or variations in speech might give cause for concern.

 

Pact enables the collation of all policies and schedule information for easy customer access, importantly allowing the platform to verify the claim against the policy for the insurer.  Relevant limits and schedule information are then known to be correct before the claim progresses.

 

For travel insurance claims specifically, the platform cross-references claims like cancellations and delay, to transport information (e.g. Flights).  Across all insurance types, checking weather patterns increases the likelihood of detecting fraud and helps insurers predict possible surges in claims:

 

“The platform is so intelligent that it can detect whether any images or videos, invoices, warranties and receipts uploaded have been used anywhere else in the world,” Mark continues, “and it’s all done within a matter of minutes.”

 

Alongside this, Pact has automated and simplified the process of dealing with third parties to obtain quotes, instruct workers, update claims status and verify job progress prior to invoicing, all accessible to both customer and claims handler through the app.

 

The platform can integrate into existing networks or be used to find local tradespeople or garages, supporting local communities. The open communication between worker, claim handler and customer reduces complications and allows the customer and/or claims handler to easily flag and resolve potential issues.

 

To further improve customer service, the mobile app features a Machine Learning Chat Bot called Ollie, which is designed to advise, assist and simplify the user experience. It delivers real time notifications, keeping claimants informed of their claim’s status improving customer service by 65%. It stores all policy information and T&Cs and can identify policy cover and limits. This increases customer awareness and creates upsell opportunities for insurers, buying or renewing with a single click.

 

Mark says that Pact has been built to deliver customer transparency and improve the experience with their insurer, ultimately building and cementing trust: “It is designed to significantly reduce the time and cost of handling claims for insurers, delivering real savings to the bottom line.  It’s win-win for company and customer.”

 

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CORONAVIRUS PANDEMIC, STORE CLOSURES, SHIFT CONSUMER BUYING BEHAVIOUR LEADING TO ACCELERATED DIGITAL TRANSFORMATION FOR MERCHANTS

Forter Issues First In A Monthly Series of Coronavirus Special Reports 


Forter, the leader in e-commerce fraud prevention, today announced the release of the Forter Special Report on the Impact of Coronavirus on Consumer and Fraudster Behaviour. The report provides merchants across industries with insight into trends seen within the $150B in transactions that Forter processes annually.

As the Coronavirus pandemic sweeps across the globe, government responses have included enforced social distancing and financial support to beleaguered economies. Merchants who sell non-essential goods have responded by closing physical stores, and in some regions also their online operations. Consumers have begun to shift their purchases, even those of essential items such as groceries, online.

The Forter Special Report tracks trends and spikes in consumer behaviour as well as innovative methods that opportunistic fraudsters take to prey on consumers during this unprecedented and unpredictable time.

“Merchants are scrambling to cut costs, reduce the impact of fraud, scale efficiently, and deliver a consistent customer experience to meet rising consumer online buying behaviour,” said Michael Reitblat, CEO and co-Founder of Forter. “The aftermath of the pandemic will accelerate digital transformation among merchants as consumer shopping habits adapt.”

Covering industries including travel, fashion and beauty, food and beverage, marketplaces, and more, The Forter Special Report uncovers consumer buying trends such as:

  • The travel industry has been extremely hard hit. Regional variations are appearing, in particular an increase in purchases of inbound international travel to China in the weeks before the country closed down inbound travel on 26 March. Data in the last month points to “optimistic travel” in which the travel date is 120 or more days following booking. Such bookings now account for 65% of travel purchases.
  • The food and beverage industry has seen a dramatic increase in online purchases. New accounts now represent 15-25% of all customer volume, compared to 5-7% prior to the pandemic. As merchants struggle to manage the increased volume and meet expectations of new customers, we are seeing an increase in service chargebacks.

Fraudsters are exploiting confusion and uncertainty caused by government and corporate policies:

  • As people adjust to working from home, Forter sees a marked increase in social engineering fraud, associated with fake emails purporting to be from HR and corporate addresses. Here fraudsters invite people to click for more information, instead taking victims to malicious sites.
  • With a shift to online shopping in Apparel and Accessories, we see an increase in gift card purchases. While a higher number of legitimate buyers usually means that fraud rates drop, gift card fraud rates have not. Fraudsters have noticed an increased demand of the completely virtual merchandise that is easy to monetise.

In its recent report, “Mitigate Coronavirus (COVID-19) Business Impacts With Digital Commerce (March 2020),” Gartner asserts that “the COVID-19 outbreak will negatively impact business performance in the short term as offline activities are cancelled and online orders overwhelm delivery capacities. Application leaders can mitigate the impact and ensure continuity of operations by accelerating digital commerce initiatives.”

 

“With more consumers experiencing buying online, we expect merchants who hadn’t considered e-Commerce as a viable platform to now try it,” continued Reitblat. “Merchants that had already adopted e-Commerce struggle to meet this increase in demand. Working collaboratively from home and hiring to meet the volume create obstacles for those who manually review transactions for fraud.”

Forter’s integrated fraud prevention platform delivers real-time decisions at every point of the customer journey from account sign up and login, to purchase, and to returns. The system is tailored for each merchant based on its unique business requirements, pairing merchant feedback with Forter’s expertise.

Forter’s growing Global Merchant Network includes over 620 million consumers globally and 97% of online US consumers. Links among known consumers and those new to the network allow the platform to infer trust, resulting in higher accuracy without the need to manually review transactions and interactions.

With the Forter platform merchants can expect an up to 90% reduction in false declines, recapturing otherwise lost revenue and delivering the best possible buying experience to their consumers, with an up to 90% decrease in chargebacks due to fraudulent activity. Forter allows merchants to scale and accelerate their digital transformation strategies even in an uncertain time.

“Rules based systems by their nature look at the past and adapt to it,” said Reitblat. “New consumer behaviours, which we’re seeing across industries, as well as new fraud behaviours, are missed by these systems until they can adapt. Forter’s identity-based system authenticates the buyer, not just the behaviour.”

Together with the Special Report, Forter has also issued its Eighth Fraud Attack Index, highlighting industry trends and innovative fraud vectors, showing the evolution of fraud, comparing H2 2019 to H2 2018. The report features the continued evolution of fraud attack vectors across all customer touchpoints, demonstrating the need to protect merchants’ digital offerings at all interactions in the customer journey, from account abuse to payment abuse to policy abuse.

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