The digital economy is accelerating the decline of the use of cash and cheques. Cash as a form of payment is shrinking in Australia because tapping a card or using a smartphone are just too convenient. With the death knoll looming in the future for ATMs, Australian banks have abolished cash withdrawal fees just 50 years after the first ATM started for business in the country. The move in August 2014 to mandate chip and PIN across all card payment terminals in Australia as a way to completely phase out signatures as a form of verification, has seen Australians transact a record $714.5 billion on their cards in 2016 alone. The benefits have been so great for Australians that the country’s dependence on contactless payments has begun moving beyond just using EMV-enabled cards. In fact, consumers are now increasingly using their near-field communication (NFC-enabled smartphones) to conduct contactless transactions boosted by Apple Pay’s availability in the region. In both Australia and New Zealand, payment technology is progressing rapidly beyond EMV, also known as chip and pin, to contactless payments.
But what is it about these technologies that has Australians tapping and going, to use Visa’s apt phrase?
Firstly, the advancing technology offers better security—each contactless transaction is identified by its own unique 16-digit identifier. This number is generated by a contactless-enabled terminal for every tap, making it virtually impossible to replicate. Additionally, a tap-and-go transaction requires the consumer to be physically present. Secondly, speed and convenience are huge factors in the growth of contactless payments. Customers no longer have to wait to swipe and then sign or enter their PIN for verification.
Unfortunately, Newton’s Third Law of physics—every action has an equal and opposite reaction—also applies to payments systems. The annual fraud report by payments industry body, Australian Payments Network, has found card fraud is increasing as Australians continue to embrace the convenience of cards and spend more than ever on them. By mitigating point-of-sale fraud, EMV technology has compelled criminals and fraudsters to focus their energies on Card Not Present (CNP) channels. As consumers continue to shop with more connected devices, fraud rates will continue to increase.
Fraud accounted for $534 million of all transactions made on cards in Australia in 2016, according to the Australian Payments Network. Wise merchants need to work with their existing providers—acquiring bank, payments gateway provider, and/or website developer—to implement solutions that can detect and stop fraudulent payments with a multifaceted operation to manage multiple anti-fraud tools in real-time.
For merchants who wish to strengthen their risk management, the ideal line of defense would allow merchants to get involved during the initial dispute call to issuing banks. Merchants can provide insights into the cardholder’s order by providing shopping cart level data through the financial institution’s platform. This data can help cardholders better understand their purchases and avoid filing false cases of fraud that result in lost sales. This is invaluable as it provides the cardholder with the information they need to remember the charge, while enabling the issuer to obtain vital information about the transaction. Without this level of data, card issuers are limited in their ability to remedy the situation and often resort to filing a fraud or chargeback claim. As a result, issuers see their costs spike when legitimate charges get challenged again during the representment process, as merchants seek to protect their sales. By providing all of the relevant order details through the financial institution, deeper levels of insight help reduce cardholder confusion while benefitting the card issuer.
Today, it’s also possible for a post-billing chargeback notification platform to process hundreds of thousands of cases monthly, and to enable almost near real-time collaboration for both fraud and non-fraud chargeback disputes. By integrating directly with card issuers and redirecting disputes from the issuer to the merchant for resolution, transaction disputes can be resolved before they escalate and become chargebacks.
Effective Fraud Prevention
It is complicated, but with the right tools the fraud prevention process can be optimized to save time and money. Ultimately, dealing with fraud in an aggressive and analytical manner ensures that everybody wins. Merchants avoid costly fees, fines or penalties, issuers experience lower operating expenses while supporting cardholder satisfaction through timely resolution, and card holders are deterred from filing unnecessary chargebacks for items and services they truly purchased.