MasterCard's licensing of nearly 40 application vendors to integrate its secure payment application technology and universal cardholder authentication field as part of their product offering, should help in the battle against online fraud.
MasterCard's and Visa's secure payment systems (Verified by Visa) should continue to gain acceptance from consumers, merchants and application vendors, according to Avivah Litan, Financial Delivery Systems Analyst for GartnerGroup, Stamford, Conn.
The new vendor agreements should help MasterCard build out the necessary infrastructure for its new security system, Litan said. The vendors will provide the applications for card issuers and retailers while MasterCard will provide the technical specifications for the new security system.
Litan urged MasterCard to do more to ensure the success of its security program. More specifically, MasterCard should certify that the listed vendors comply with its specifications.
Litan also said that MasterCard should work aggressively on marketing and raising brand awareness as well as enlisting more card issuers and merchants for the program.
Online merchants should adopt MasterCard and Visa's online security programs, once the card companies offer clear financial incentives, including lower discount rates or shifting financial liability for fraud from online merchants to issuers, Litan added. If the card companies made these moves, it would guarantee wider adoption of these systems by consumers and merchants alike.
Consumers have taken the first step in accepting credit card companies' solutions to online fraud, according to GartnerGroup.
According to a Gartner survey:
- A little more than 5 percent of respondents fell victim to credit card fraud in 2001, while identity theft struck 1.9 percent. The identity theft may have occurred online or offline.
- More than 18 percent of respondents try to fight fraud through one of the new credit card protection systems.
Other security schemes, including public key infrastructure (PKI), smart cards and disposable card numbers received far less consumer support than the card companies' new online card protection systems.
According to Litan, the consumer resistance to PKI and smart cards highlights two critical elements of card acceptance: convenience and brand recognition. Most consumers won't take the extra steps necessary to use PKI, as the failure of the PKI-based Secure Electronic Transactions system proved.
The new online protection systems, in contrast, are very easy for consumers, banks and merchants to use, Litan said. Additionally, consumers surveyed believed that the new systems offer better protection than PKI or smart cards.
Online retailers will be helped by consumer adoption of these systems, Litan added. Yet the credit card companies want to see how effective these new solutions are before taking the next major step: lowering merchant fees. Merchants still pay about 1 percent more for Internet transactions than for in-store transactions. However, both credit card companies are planning some shift in liability rules.
Biometric systems that are currently in development, in pilots or in limited use, may also help battle the problem of Internet card fraud. Some of these systems use a fingerprint or voice print in addition to the credit card number to positively identify the user. However, these systems have their own challenges, including cost and acceptance by customers, who want fraud protection balanced with identity protection.