The introduction of an online verification process by Visa and Mastercard could set the stage for a new boom in online shopping in South Africa. Using Verified by Visa (VBV), which is widely used in Europe and America, provides protection for customers and merchants transacting online by ensuring that the person making the purchase is the owner of the card. Mastercard’s Securecode offers similar protection.
“Card not present” transactions are open to abuse. Anyone can get hold of your credit card details and make online purchases. According to a survey by Visa, consumer concerns have been increasing, with 63% of card holders being extremely concerned about online fraud. At the same time, merchants have a good reason to be nervous as they carry the liability of a fraudulent transaction. If the customer can prove no purchase was made, the merchant carries the cost.
As a result of this liability, merchants are only selling lower-value items online and smaller merchants who cannot afford to take the knock are avoiding going the online route altogether, according to Chris Savides of SAFE (South African Forum for eTailers).
According to Ben Dominguez, vice president of Visa’s Global eCommerce, merchants using VBV have seen a major decrease in online fraud. Dabs.com, a US online merchant, has seen a monthly cost saving of around $80Â 000 a month in fraud-related charge-backs. Providing a safer online shopping experience for customers has shown an increase in trade, with a major US electronic retailer substantially increasing its online sales. “Ecommerce is a big growth sector globally for consumer spending, and merchants see it as a great new business opportunity,” says Dominguez. In South Africa last year, VisaNet, Visa’s back-end system, saw a 152% increase in ecommerce transactions.
If a merchant signs on with VBV, the liability moves from them to the bank that issued the credit card.
If the card has been enrolled on the VBV system, a fraudulent transaction could not go through as long as the criminal does not know the secret password. In addition, if the customer has not been enrolled and the fraudulent transaction goes through, the liability sits with their bank for not encouraging the customer to sign up. This will offer protection to merchants which Savides believes will encourage more merchants to move into ecommerce. A smaller merchant could never afford to lose R45Â 000 a month in fraudulent transactions.
It will also increase the value of the average transaction. According to Dominguez, the average transaction level for a VBV merchant is $172 compared to $106 for nonparticipating merchants. In South Africa, 400 merchants are currently signed on for VBV and all banks have enrolled their credit card customers on VBV or Securecode even though customers still need to register individually.
The retailers include major brands such as Look&Listen and Digital Planet, while Kalahari.net, 1Time Airlines and NetFlorist will be signing up shortly.