The majority of this fraud can be attributed to CNP transactions. In countries with a large presence of online merchants, CNP fraud makes up an overwhelming majority of the total fraud figures, as demonstrated by these stats for the UK (69%), Canada (79%) and Australia (77%). The extent of online fraud, however, is not surprising. CNP transactions carry a greater security risk not only because of the difficulty of verifying the identity of the purchaser but also of determining whether or not the purchaser is actually the authorised cardholder. The 3D Secure protocol, which is one of the oldest and most robust technologies used in the fight against CNP online fraud, has been available since 2001.Īlthough the core purpose of the protocol is to protect the consumer by providing an authentication layer to prove that the cardholder used their card at the time of the transaction, it also offers protection for merchants against fraudulent chargebacks. This protection comes in the form of a potential liability shift from the merchant to the card issuing bank. It is important to remember that this protection is only provided for fraudulent chargebacks and does not apply to any non-fraudulent consumer claims. The point at which the liability shift occurs is not the same in all instances and differs depending on factors such as the card provider, whether or not a specific card is already enrolled in a 3D Secure program and the response received from the authentication request. So how does liability shift work with 3D Secure? With the current version of the protocol (3DS1), whether or not a liability shift is permitted will depend on the results of two steps. In the first step, the merchant sends a request to the cardholder’s issuing bank to find out if a specific card has been enrolled in its 3DS program.
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