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Eliminating Fraud: Lessons for Securing More Online Transactions

Posted on 2.23.2014

By Tara Lavelle, CardinalCommerce


From major data breaches to record numbers of online shoppers over Thanksgiving weekend, the 2013 holiday season offered an interesting mix of challenges to retailers. As well, emerging EMV technology (named for developers Europay, MasterCard and Visa) is changing the focus of credit card fraud worldwide. What lessons can we learn and how can we apply them to planning for 2014 and beyond?

Consumer Authentication Reduces Fraud, Shifts Liability

If you are a retailer with an online presence in the U.S., now is the time to investigate and activate your consumer authentication — if you haven’t already. EMV technology employs a chip to eliminate credit card counterfeiting in point-of-sale (POS) transactions. While the EMV standard is planned to roll out in the U.S. by October 2015, Target Corp. recently revealed they are accelerating their adoption of chip-enabled technology, with implementation at least six months sooner. The lesson for online retailers? As EMV was deployed in other regions over the last several years, more fraud moved to the card-not-present (CNP) world, pushing online retailers to deploy consumer authentication to secure their transactions. That same scenario is expected to play out in the U.S.

Widely known consumer authentication programs such as Verified by Visa and MasterCard SecureCode virtually eliminate online fraud by requiring consumers to authenticate themselves. Merchants who use consumer authentication programs can enjoy reduced interchange fees and liability shift on chargebacks. With an authenticated CNP transaction, liability shifts from the merchant to the issuing bank. Consumer authentication does not directly impact POS data breaches, but indirectly, it makes it harder for criminals to use stolen data for online transactions. With consumer authentication, if a stolen card is duplicated and attempted to be used online, the user is prompted to authenticate with a PIN, a password, an answer to a security question, or a one-time password sent to the legitimate cardholder’s mobile phone — none of which a fraudster would have. The transaction is declined and the consumer’s credit is safe for online transactions.

Authentication Should Foil Fraudsters, Not Customers

When establishing a consumer authentication program, online merchants must be mindful of their customers’ shopping experience. Look to a rules-based program that allows you to control which transactions to challenge with authentication. For example, you may want to create special rules for transactions initiated on a tablet in a foreign country, or for a particular product SKU or transaction amount. The filters you choose can allow “good” transactions from loyal customers to process with less friction while blocking online thieves, increasing sales overall. Select a program that interacts with banks and merchants real-time to deliver the best possible customer experience.

Consumer Trends to Expect for Holiday Season 2014

Consumers will expect retailers to be omni-channel. Whether a consumer is in-store, at a desktop, or using a mobile phone or tablet, he or she will expect the same experience across channels — the same brand voice, the same merchandise, the same offers, discounts and prices, the ability to ship to home or another location, or to pick up in-store. So merchants will have to be flexible and think smart in every channel if they want to have a successful holiday season.

There will be an uptick in mobile device usage. Consumers are leaning more and more on their mobile phones and tablets, especially as they multi-task through the holiday season. In 2013, according to the IBM Digital Analytics Benchmark, mobile traffic grew to 35.8 percent of all online traffic, with 21.9 percent using mobile phones and 13.2 percent using tablets. However, tablet users drove 12.3 percent of online sales, more than double that of smartphones (5.4 percent), showing that consumers shop with their phones but buy with their tablets. As the trend to mobile continues, it will be critical to employ a consumer authentication system that identifies and interacts with multiple devices.

Essential Steps to Converting Secure Online Customers

• Make it easy for your customers to shop, with a website design that formats to any device, and simple navigation for phones and tablets.

• Offer mobile payment solutions and wallet solutions that are mobile-friendly — nothing frustrates potential customers more than having to type in dozens of characters to make a purchase.

• Minimize fraud with a consumer authentication program where you can set up rules to allow your loyal customers to buy with minimal friction, but where fraudulent transactions are consistently declined.

As an online retailer, successfully converting customers means making the transaction easy, but also taking careful steps to minimize fraud. Disregard the above, and you might miss out on a record holiday season of your own in 2014, and invite an avalanche of fraud in 2015.


Tara Lavelle is the Vice President of Marketing at CardinalCommerce, where she brings a unique blend of e-commerce, retail strategy and merchandising experience and a proven track record for driving sales goals through multi-channel platforms and experiences, as well as propelling marketing strategies through capitalization of analytics and consumer insights.

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