Payment card providers that are battling for market share are introducing new services to defend and expand their client base. New initiatives by issuers bring a better customer experience. However, they also bring the attention of increasingly sophisticated fraudsters.
Co-Founder and CIO of risk mitigation experts Global Risk Technologies, Monica Eaton-Cardone, analyses recent moves from payment giants, MasterCard and Visa, to protect their European market share against competitors while taking into account the risk of fraud.
The European market compromises 1.5 billion payment cards. It has a combined value of nearly €3 trillion. Visa and MasterCard possess a combined 86% market share.
It is a fact not lost on the payment giants’ competitors such as Giropay, iPay, PayPal and Apple Pay.
Both Visa and MasterCard have been proactive in protecting their market share with new services.
The Visa Checkout service has registered over 6 million users – a 92% increase of sign-ups since the start of 2015.
Visa offers shoppers a simpler way to checkout online using just three easy clicks. The online payment service has partnered with fast-food giant Taco Bell, multinational consumer electronics giant Best Buy and leading retail bookseller Barnes & Noble, as well as Australian cinema chain Hoyts, and sports ticketing company Ticketek.
MasterCard has also been active in maintaining its market share although it lost of a point of market share in 2014.
It launched a recent ground-breaking promise to improve and expand the minimum standard for consumer protection against unauthorised transactions across the globe with one single rate.
Zero Liability, developed in line with issuers and regulators, is a global promise to increase the minimum standard for consumer protection against unauthorised transactions, subject to any local laws that may be applicable.
The competitive advantage of this scheme is clear: less liability for the cardholder will ultimately equate to higher market share for MasterCard by increasing loyalty and usage.
However, there is an underlying issue of more risk to such schemes – so-called friendly fraud. Even though a scheme such as Visa Checkout strives for the highest levels of protection, online criminals continue to challenge the financial safety of consumers.
Risks in any new online payment service can generally be reduced by educating merchants to take precautions themselves as well as the safeguards MasterCard, Visa and other providers implement.
However, the opportunity for fraud increases as easier online payments methods are made available. The increasing sophistication of online criminals means that fraud managers must work harder than ever before to keep consumers safe.
Fraudulent transactions are varied, which makes it harder to identify among legitimate activity.
The advent of more convenient payment platforms runs the risk of higher levels of chargebacks.
The benefits of chargebacks for consumers who have been defrauded are evident. Unfortunately fraudulent chargebacks, friendly fraud, can hit the bottom line for merchants. However, merchants should not be discouraged from implementing quicker, easier payment schemes, especially if they can mitigate the chargeback risk.
It is merchants and issuers that ultimately support specialised fraud prevention strategies and chargeback analysis tools that will save time and money in the long run.
Fraudsters will always attempt to exploit the vulnerabilities of new developments in payment technology. However, the pressure to offer a better customer experience will take precedence over the risks new services might bring. The efforts of issuers to protect clients, with the precautions merchants can take, negate the risks that accompany new schemes such Zero Liability and Visa Checkout. The industry will be aware of fraud, fight it, but the customer experience comes first – and that is how it should be.