The SignatureLink SecureBuy(TM) 2012 CNP Fraud Study, conducted in August and September 2012, polled 379 online and offline merchants of all sizes about their anti-fraud efforts.
CardNotPresent.com and SignatureLink expected to find that many merchants were ignoring the threat of payment fraud and simply accepting chargebacks as a cost of doing business online. As it turns out, study respondents are not only aware of fraud, a full 65% are attempting to address it through active verification systems like Verified by Visa and MasterCard SecureCode. That's an admirable effort, said SignatureLink CEO Greg Wooten, but it's often a case of the cure being worse than the disease.
"We applaud the many merchants using active authentication techniques," Wooten stated, "but the user experience could be improved among legitimate customers by deploying risk-based passive authentication to invoke active authentication."
The study also showed that 52% of merchants are performing pre-fraud screening, typically geolocation of the customer's IP address. Unfortunately, fraudsters can easily manipulate those screening solutions.
"Very few merchants are using second-generation geolocation solutions,"
explained Wooten. "The problem is that a fraudster with any skill whatsoever simply spoofs his IP address and easily bypasses a first-generation geolocation filter. The merchant ends up with a false sense of security while remaining vulnerable to fraud."
Perhaps the greatest opportunity for merchants to shore up their e-commerce fraud fighting efforts lies in chargeback prevention and management. The SignatureLink SecureBuy(TM) 2012 CNP Fraud Study revealed that only 10% of merchants collect the buyer's consent to their terms and conditions (T&Cs) and refund policies through voice or signed consent. Of the remaining 90% of merchants, 50% simply require the customer to check a box during the online checkout process, and 40% never require the buyer to consent to anything at all.
That means 90% of merchants engaging in e-commerce are leaving themselves wide open to Cybershoplifting(TM), where the customer makes a purchase, receives the merchandise, and then disputes the transaction with his or her credit card company, triggering chargebacks for merchants.
"That in itself is a problem," noted Steven Casco, founder and publisher of CardNotPresent.com, "because our study also found that over 60% of merchants never have the buyer's signature on file for any transaction, and over half of merchants lose the chargeback representment process almost every time."
Moreover, a link or pop-up to a merchant's T&C does not solve the problem. "This approach is not in line with current regulatory standards and is actually considered deceptive," stated Wooten. "There's no way for either side to prove their case or to determine what the T&Cs were for a given transaction. Had they captured a signature within the sales draft that carried a true chain of custody, it would be a different story -- because in the e-commerce fraud space, the signature ultimately rules."
The full results of the SignatureLink SecureBuy(TM) 2012 CNP Fraud Study are available at: http://www.signaturelink.com/2012-cnp-fraud-study.html
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About SignatureLink, Inc.
Founded in 2002, SignatureLink, Inc. is the eCommerce stabilizer. The company debuted its patented, electronic handwritten signature technology -- the online signature pad -- in 2005. Since then, SignatureLink has diligently developed products that help online retailers successfully fight Cybershoplifting(TM) and other forms of eCommerce fraud to lower the cost of payment acceptance and increase profits. Visit http://www.signaturelink.com for more information.