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EU plans to reduce payment fraud may disrupt e-commerce and not increase security - expert comment PDF Print E-mail
Wednesday, 23 November 2016
The European Union's planned rules to reduce fraud by forcing the use of passwords or codes to authenticate electronic payments above 10 euros ($10.60) risk disrupting online shopping and may not increase security. These regulations have come under fire from Visa and other payment companies.

Commenting on this, Robert Capps, VP of business development at NuData Security, said "We'd tend to support Visa’s stance on this issue in several ways. While it may seem that adding more identity tests to the transaction stream should make the transaction more secure, this isn’t necessarily true. If the test is vulnerable to impersonation, as we see with physical biometrics, or is as vulnerable as passwords, no number of additional touchpoints will make the transaction more secure.

The larger point here, however, is that adding friction to the transaction stream will absolutely result in increased cart abandonment rates and reverses a trend toward less friction that we have been striving for. Given that the typical abandonment rate swings between 60 and 80 percent and this is so well-known there is even a WiKi for it, it seems highly punitive to enforce regulations that will further impact retailer’s bottom line. Ultimately, as these things almost always do, merchants will pass the pain down to consumers. Yes, consumers, who have already been forced to bear the brunt of security tests, false positives and false declines due to bolt-on security systems that can’t be engineered fast-enough or well-enough to take customer experience into the equation.

Adding this type of friction, especially automatic declines, will indeed see major disruptions in how we all shop, particularly if similar regulations are adopted elsewhere. The key is to find that balance between security and customer experience. Stray one way or the other and you’ve got revenue losses in the form of fraud or revenue loss in the form of customer unhappiness.

We work with many banks and merchants who, like us, want to provide customers with friction-free experiences. We do that through passive biometrics and behavioural analytics that enable banks and merchants to understand who their good customers are over the entire account lifecycle by using dynamic multi-layered behavioural data collected and analysed in real time as a consumer transacts. Given our success in determining who is a good user and who is not, plus what is good automation and what is not, we’re able to offer merchants and banks the unheard-of option in a security solution to provide premium customers with premium green-path experiences."

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