3-D Secure flawed: PayGate CEO

Industry players are divided on the benefits and drawbacks of the 3-D Secure system, which is widely used in South Africa to limit credit card fraud with online shopping.

3-D Secure, a system designed by Visa to provide an additional security layer for online credit and debit card transactions, is seen an irritation to numerous consumers. However, some industry players feel that it is a great way to limit credit card fraud.

“Anything we can use to reduce or prevent online fraud is a good thing. Merchants and cardholders use this technology on a daily basis – when paying for goods at Pick ‘n Pay or Woolies you produce your card and key in your secret pin. Why is it so strange performing the exact same process when buying via the Internet,” said VCS’s Alf Close.

According to Close, 3-D Secure is a small hurdle to overcome for new online shoppers, and protects both the merchant and the cardholder.

“Until 3-D Secure came about, the merchant never had any protection. I cannot understand anyone who would not want to make use of it and it is free,” said Close.

Close said that he doubts that 3-D Secure will result in any lost sales, arguing that the benefits definitely outweigh the drawbacks.

PayGate MD Peter Harvey disagrees, saying that, while the system improved over time, 3-D Secure still equates to lost sales.

“It used to be a major hurdle. When we first implemented 3-D in 2006, we noticed that almost half of all 3-D transactions were either failing or being abandoned (for various reasons). However, the system has improved dramatically and is working pretty well today,” said Harvey.

However, Harvey pointed out that 3-D Secure still results in approximately 15% to 20% loss of sales. “It is not possible to tell what percentage of the lost sales is due to good customers abandoning the transaction and what percentage is due to the fraudster being forced to abandon the transaction,” Harvey said.

Wantitall CEO, Justin Drennan agreed, saying that the system definitely leads to lost sales. “Each bank seems to have a slightly different 3-D Secure implementation, meaning there is no consistency in the implementation,” said Drennan.

“Some use passwords, some use SMS verification to registered cellphone numbers. So there are potentially many areas where the process could degrade, and customers are therefore unable to transact.”

Despite these drawbacks, Drennan thinks 3-D Secure is a necessity in South Africa where online fraud is a real issue – both from a merchant and customer perspective.

3-D Secure flawed

According to Harvey, 3-D Secure could work but it is flawed because not all banks are enrolled for the service – and the banks that are enrolled are not all forcing their card holders and merchants to enroll for 3-D Secure.

“Basically there are always going to be problems with 3-D Secure unless everybody uses it,” said Harvey.

“In my opinion, the South African banks should force all the local airlines to make use of 3-D Secure. Airline ticket sales account for the biggest percentage of e-commerce transactions, and if consumers used 3-D Secure to buy airline tickets, then they would be comfortable using 3-D Secure on other web sites,” said Harvey.

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3-D Secure flawed: PayGate CEO