ne major drawback of shopping online is the inherent risk of fraud and chargebacks in doing so. Cyber threats worry customers and merchants alike, and when the internet age began credit and debit card companies were woefully underprepared for the risks that shopping online posed.Fortunately, times have changed and card brands like Visa and Mastercard have come up with secure solutions to make card-not-present transactions much safer.
Enter 3D Secure: a security protocol that was first implemented by Visa and has since been adopted by all major card brands. 3D Secure is called by many names by the different card brands—Visa has Verified by Visa, Mastercard has SecureCode, Discover has ProtectBuy, and AmericanExpress has SafeKey, but its function is essentially the same fore all: tie the financial authorization process to online identification.
Recently, PayArc integrated with PAAY – “a software solution designed to protect merchants from friendly fraud without interrupting the customer experience at checkout.” PAAY uses a security protocol called EMV 3DS, which was created by the card networks and prevents unauthorized card-not-present transactions and authenticates card-not-present cardholders. With just a few lines of code to copy-and-paste, PAAY “sits on the merchant payment form and allows the acquiring bank (merchant’s bank) to verify with the issuing bank (cardholder’s bank) that a cardholder is in fact who they say they are.”Because this solution verifies the identity of the cardholder with the issuing bank, the liability of the transactions shifts from the merchant to the issuing bank—meaning that the risk of friendly fraud is significantly reduced.
Consider one of PAAY’s case studies: A nutraceutical company that was experiencing a 2.25% chargeback rate due to friendly fraud. This chargeback rate resulted in $277,762.50 in annual lost revenue. Once PAAY was implemented, the chargeback rate dropped to 0.05% and only $74,040 in lost revenue.
Because 3D Secure is highly recommended by card brands, they offer interchange discount to merchants that implement the technology. PAAY also did a case study to determine how much a financial services business saved in interchange fees after using PAAY. Out of 456,328 monthly transactions, 29% received the lower interchange rate which then resulted in $80,936.69 in total monthly savings.
The exact amount the interchange fees decrease is dependent upon the type of card used. There are five cards that receive the lower interchange rate, and they are as follows:
|Interchange Description/Card Type||# of Transactions||Amount ($) on Card||Interchange Fee Without PAAY||Interchange Fee With PAAY||Total Savings with PAAY|
|Visa Debit & Prepaid Regulated||20,420||$20,458,976.18||0.05%||0.05%||-|
|Visa Purchasing Card - Card Not Present||30,998||$20,401,638.28||2.65%||2.65%||-|
|Mastercard World Elite Merit I||33,890||$19,544,014.87||2.50%||2.30%||$39,988.03|
|Visa Signature Preferred Card Not Present||35,556||$16,270,33.94||2.40%||2.40%||-|
|Visa CPS Rewards 2||23,901||$12,677,577.81||1.95%||1.80%||$19,016.37|
|Visa Signature Preferred B2B||30,926||$10,059,259.21||2.10%||2.10%||-|
|MC Regulated POS Debit with Fraud Adjustment||8,954||$9,621,179.04||0.05%||0.05%||-|
|MC Commercial Data Rate 1 - Large Market Fleet||8,742||$8,323,165.53||2.70%||2.70%||-|
|Mastercard Business Spend Level 4 Data Rate I||8,960||$7,689,088.14||2.96%||2.96%||-|
|Business Tier 4 - Business to Business (B2B MCCs)||14,379||$7,020,489.18||2.50%||2.50%||-|
|Mastercard World US Merit I||34,663||$6,823,573.37||2.05%||1.68%||$24,867.56|
|Visa CPS E-Commerce Basic Debit||7,760||$6,720,962.25||1.65%||1.60%||$2,482.46|
|Business Tier 4 - Card Not Present (Non T&E)||4,521||$4,964,920.48||2.70%||2.70%||-|
|MC Commercial Data Rate 1 - Large Market Purchasing||7,214||$4,766,497.17||2.70%||2.70%||-|
|Visa Signature Business - Business-to-Business||10,334||$4,532,781.83||2.40%||2.40%||-|
|Visa CPS E-Commerce Basic||10,078||$4,488,998.47||1.80%||1.80%||-|
|Mastercard Enhanced Merit I||5,778||$3,950,678.31||2.04%||1.83%||$8,296.42|
These reductions in interchange rates can spell big savings for your company, and if there’s one thing we know you want, it’s to lower your credit card fees as much as possible so that you can keep more of what you earn.
The best part about PAAY is that your customer will never even notice that it’s there—there are no false declines, and it does not affect cart abandonment. Contact PayArc today to find out to integrate PAAY into your eCommerce business!