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CoverStory

To help better combat fraud, the This is despite the migration to the EMV (Europay,
NRF-Forrester report said, retailers MasterCard and Visa) technical standard for smart cards,
which the NRF reported is now being used by a majority
want better cardholder authentication of merchants (81 percent of small retailers and 99 percent
procedures for both in-person and of midsize and larger merchants).
card-not-present (CNP) purchases. "In a post-EMV world, fraud is shifting from in-person
Fifty-one percent of those surveyed said to ecommerce channels, so retailers have been busy
biometrics would be the best way to bolstering their defenses to mitigate the increasing costs
verify transactions. Fifty-three percent and risks of ecommerce fraud," the report stated.
expressed interest in specific biometrics According to Forrester, ecommerce fraud grew by
techniques, such as fingerprints and 13 percent in 2017. This followed a 35 percent hike
facial recognition. in ecommerce card fraud between 2015 (when most
merchants were encouraged to have terminals in place
that could read EMV chip cards) and 2016, according to an
analysis by the Federal Reserve Board.
But the betting is that cash discount programs will be
short lived. Visa raised concerns over cash discounting To help better combat fraud, the NRF-Forrester report said,
in October when it issued a bulletin reminding acquirers retailers want better cardholder authentication procedures
and their sales partners the programs must comply with for both in-person and card-not-present (CNP) purchases.
its rules. Visa rules require that discounts for cash be Fifty-one percent of those surveyed said biometrics would
applied to stated prices, akin to the way gas stations offer be the best way to verify transactions. Fifty-three percent
discounts for cash payments.
expressed interest in specific biometrics techniques, such
as fingerprints and facial recognition. Once the stuff
"It is just a matter of time before Visa and Mastercard of science fiction, biometrics-based authentication has
become vicious about enforcing the rules, or some shopper become a reality in payments, with Apple Pay, Google
who happens to be a grandmother of a U.S. Congressman Pay and Samsung Pay, all featuring fingerprint and facial
or Senator starts making a fuss," Steve Norell, director of recognition for payment authentication.
sales at US Merchant Services Inc., wrote in his Dec. 10,
2018 Street Smarts column, "The next to last word on In January, Mastercard decreed that issuers must support
SM
surcharging – maybe."
biometric authentication for CNP transactions alongside
PIN and password verification by April 2019. The new
Many industry insiders believe cash discounting will requirement also applies to in-person payments using
give way to more merchants surcharging credit card mobile devices. Mastercard said the move is in keeping
transactions, which the card brands permit provided with regulations for strong customer authentication
specific disclosure and other rules are followed. spelled out in the latest Payment Services Directive (PSD2)
implemented this year by European Union member states.
Currently, laws in 10 states and Puerto Rico prohibit
surcharging. However, laws in four of those states – That directive paves the way for nonbanks (such as
California, Florida, New York and Texas – have been fintechs), acting on behalf of business and consumer
successfully challenged in federal courts. The courts ruled customers, to initiate payments directly from those
that the laws infringe upon merchants' First Amendment customers' bank accounts – hence its requirements for
rights to free speech because they allow merchants to advanced security protocols. Mastercard also pointed to
offer discounts for cash but not to surcharge credit card research suggesting most consumers and bankers support
transactions. The U.S. Supreme Court seemed to side greater use of biometrics.
with those lower courts when in 2017 it instructed a
federal appeals court in New York to reconsider a ruling Interest in PIN authentication is also strong. Among
on that state's anti-surcharging law with an eye toward merchants surveyed by the NRF and Forrester this fall, 95
Constitutional free speech protections.
percent said they believed requiring PINs would improve
Mounting interest in biometrics, PIN authentication the security of card transactions; 92 percent said they
would implement PIN authentication if it were available.
While pricing concerns persist, card fraud appears to
be the number one concern facing merchants today. While EMV chips make it difficult to counterfeit credit
Among merchants surveyed this year for the State of Retail and debit cards, they do little to stop criminals from using
Payments, a biennial study prepared by Forrester Research stolen cards, Stephanie Martz, NRF senior vice president
and the National Retail Federation, 55 percent identified and general counsel noted. Decisions by the major
fraud as the top payment-related challenge facing them, card brands to drop signature requirements for card-
ahead of cost of acceptance, which was cited by 45 percent present transactions create even greater vulnerabilities,
of respondents.
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