Visa's bid for better online protection

By PETER GRIFFIN

Credit card giant Visa has drawn a line in the sand with its new security standard for e-commerce, expecting banks to jump on board by 2003 if they want to carry out credit card transactions in cyberspace.

The new standard, known as 3-D Secure Technology, will introduce the online equivalent of signing a credit card receipt at a shop counter.

In future the Visa way of conducting transactions online will see consumers select a username and password at their bank which they will enter when prompted to at an e-commerce website.

That information is then cross-referenced with information stored on the bank's servers. A credit card on its own will not be enough to buy goods on the net.

Visa's e-commerce manager, Jackie Brian, said the system would combat the use of stolen credit cards in online transactions and afford better protection to merchants plying their trade online.

"What it means for merchants is guaranteed payment as long as they authenticate the identity of the cardholder," she said. Merchants signing up by next month would be eligible for this "liability shift".

"If the cardholder turns around and says, 'I didn't buy that', the merchant doesn't have to wear the cost of that any more."

Traditionally "e-tailers" have faced higher credit card transaction fees because of the greater risk attached to online transactions.

Risk management company CyberSource's fraud survey for last year revealed that 12 times more fraud exists in transactions carried out over the web, with the average percentage of revenue lost to online fraud at 4 per cent.

And e-tailers incurred online chargeback rates of 2.64 per cent.

Internet payment company WorldPay said it would encourage its local merchants to adopt the system.

Richard Shearer, general manager of WebFarm, a reseller of WorldPay's e-commerce products, said the success of Visa's system would rely on endorsement from the major credit-card issuing banks.

"It really relies on the banks adopting Visa's technology. In the longer term it will be all of them," he said.

So far the ANZ is the only New Zealand bank to have pledged support to the Visa initiative, but banks doing business with Visa will have to join up by April 2003.

"It will be necessary for all acquiring or merchant banks to be enabled for this and have all of their merchants enabled," said Ms Brian.

James Mitchell, group general manager for direct and card services at ASB, said the bank would be adopting the technology.

"It will require full adoption to work, which is why Visa has set those dates," he said.

Thirteen banks have pledged their support in the Asia Pacific region.