> The way CCs are going at the moment I believe there is a wide open niche
> just begging to be filled. CC fraud may only be 3% world wide but 90% of
> that 3% is internet fraud
That is simply not correct. While there is a lot of media hype on this
subject, Internet CC fraud is not a large proportion of the overall CC fraud
and the numbers are pretty much in line with that of the offline fraud
(which include stolen cards, stolen numbers, ATM scams, mail order &
telephone transactions...).
> and merchants are getting the worst end of the
> stick more and more.
Since, on the Internet, we are dealing with solely "card not present"
transactions (as in traditional mail/telephone-order), there the big issue
of chargebacks and the fact that the Merchant Banks (maliciously?) consider
this "high-risk" and place the whole liability of the transactions on the
merchants themselves.
The consumer has a six months timeframe to charge back (without much
justification, if any, to give), and the merchant can basically not do
anything to prevent this (as neatly stipulated in the Merchant Account
agreements one has to sign...). To top this off the merchant pays higher
processing fees, chargeback fees and risks very expensive penalties if
chargebacks go above a certain threshold... In that sense, I agree,
merchants are getting the worst end of the stick!
BUT with the many fraud screening tools available (AVS, negative databases,
sophisticated AI screening) and with good & careful customer support, most
merchants can stay within reasonable chargeback ratios.
I would say that over 90% of today's B-to-C e-commerce is made of "card not
present" Credit Card transactions. Given that a 2.5% chargeback ratio will
get a high level of scrutiny from the merchant banks, and that anything over
5% chargebacks is probably the death of your merchant account (VISA/MC USA
is much stricter than in the rest of the world), there would not be many
merchants left processing if fraud were higher than 3% on average...
Notice that BILLION $ industries like online adult entertainment or gambling
are still processing mainly credit cards (hundreds of millions of
transactions each year), while they are considered to be VERY high-risk by
merchant banks and under high scrutiny...
>If someone would offer them a secure transactional
> medium whith no charge backs they would grab it with both arms.
It would be very easy for credit card companies to move in that direction
and they have a few options:
- provide a gateway to verify the PIN number, therefore authenticating the
user of the CC (like is done at ATMs worldwide). The PIN would be asked to
validate any transaction and the burden of proof would no longer be placed
on the merchant in case of chargeback requests.
- use of CCs with embedded microchips (smartcards). Provide card readers to
the customers and request to insert the card & verify the PIN number to
validate the transaction. This in effect proves that the user has the card
in hand and is even more effective than the option above. Smartcards are
widely used in Europe, and Amex has the BlueCard in the USA..
So the medium exists, and I am certain consumers prefer a system backed by
their current, trustworthy credit card companies than some unknown "new
economy" solution...
But that's one man's opinion :)
Regards,
David
PS: does anyone remember First Virtual?
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