Easy Card Authentication

February 03, 2015
Grant Bissett

We’ve added a simple new feature to help fight credit card fraud.

The Problem

Businesses selling premium goods can receive fraudulent orders, and risk having their funds reclaimed due to chargebacks. For example, a business selling high–quality watches can attract fraudsters, because the goods can easily be sold after being purchased with a stolen credit card. Here’s how the scam works:

  • The thief uses stolen credit card details to order a product
  • The product arrives and the thief sells it for cash
  • The true owner of the credit card sees an unrecognised transaction in their online banking or card statement, and contacts their bank to get their money back
  • The merchant loses the funds for the fraudulent transaction (plus the cost of the goods!)

Help from the Card Schemes

The core of the problem here is that the merchant doesn't know if the buyer is the genuine cardholder. Mastercard and Visa have implemented systems to address this issue with their respective SecureCode and Verified by Visa programs. These features provide effective additional protection for merchants by asking the cardholder to supply a password at the time of purchase. Unfortunately this approach necessarily introduces additional friction into the payment experience, and in some cases this results in genuine customers abandoning their purchases.

Authentication Method Merchant Protection Customer Friction
Card Scheme ("3D Secure") High High
No Authentication None None

Instead of choosing between card scheme authentication or nothing, there’s a third option. We can try to authenticate transactions after the critical moment of purchase. This keeps the purchase process easy for genuine customers, while adding an opportunity to reject suspicious orders.

New Feature: Easy Card Authentication

The way this works is simple. Pin Payments adds a short random code to the start of the text that appears in your customer’s online banking:

In this example, a customer has purchased an expensive watch from Acme Watch Shop. If they can tell us the authentication code 172, we can be more confident that they are the true owner of the credit card.

In situations where you're unsure about fulfilling a high-value order, you can ask your customer to provide the code from their bank's website or mobile app.

Your checkout system doesn't need to change at all, and your customers don't need to do extra work or remember additional passwords to buy from you. This process can add protection without increasing abandoned orders.

Authentication Method Merchant Protection Customer Friction
Card Scheme ("3D Secure") High High
Pin Payments Medium None
No Authentication None None

We’re rolling out easy card authentication now for all new merchants. If you're already using Pin Payments and you think this feature would be helpful for your business, please email us at support@pinpayments.com and we'll enable this feature for your account.

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