The fight against online payment fraud moves up a level ahead of U.S. EMV rollout

The fight against online payment fraud moves up a level ahead of U.S. EMV rollout
By Don Bush
Kount

 

History tells us the “liability deadline” for EMV (Europay, MasterCard and Visa) rollout in the United States will see a surge of fraud online.

Learning from others’ misfortune

The rollout of EMV cards in the United States has a deadline of October 2015. This has logistical issues but perhaps more importantly it is likely to prompt a major shift in credit card fraud to card-not-present transactions. As the second largest market for online revenues,[1] when the US moves to EMV technology at “brick and mortar” POSs, we can expect a transition from offline fraud to online channels such as the desktop and mobile, as fraudsters increase their fraudulent activities.

Figures from the UK Card Association show how this occurred in the UK after it adopted EMV technology – a trend that played out in other countries across the world.[2] The difference between then and now though is that e-commerce is now a retail phenomenon. According to eMarketer,[3] over $200 billion of additional spending could flow through CNP transactions globally by 2017, presenting a vast world of opportunity to online fraudsters looking for a piece of the pie.

Responsibility moving up the food chain

The burden of liability no longer rests solely with merchants. For years, they have been responsible for ensuring their customers’ transactions are secure. Typically this involves aligning with either a trusted payment service provider (PSP), payment gateway, or hosted pay page (HPP) that works with a fraud prevention leader. The goal is to ensure transactions are secure as well as able to provide crucial information of fraudulent behavior the retailer is experiencing.

However, financial regulators are increasingly linking fraud mitigation and compliance with regulations, which pushes the liability moving up the food chain, extending from merchants to payment choke points.

As well as needing to offer an integrated fraud solution to their customers, online payment processors need greater access to sophisticated fraud tools to protect themselves from regulatory action that could destroy their reputation.

Payment processors are constantly looking for new ways to differentiate from their competitors. Adding services such as fraud mitigation allows them to offer value-added services to their online merchant base, add revenue and increase customer retention.

Value-adding above commoditization

Payment processing fees are becoming commoditized, and a “race to the bottom” on pricing is now the norm. Additional services like fraud can help offset the revenue lost in interchange fees.

As technology becomes more pervasive, accessible and affordable, more ‘brick and mortar’ businesses are using the Internet as an additional sales channel to increase revenue and customer satisfaction. This includes ambitious SMEs [small and midsize enterprises] who want to be able to grow their businesses and compete in an increasingly crowded space by offering great products at great prices, while providing a great overall customer experience.

Efficient fraud prevention options that suit the business are vital technological tools that can have a drastic effect on business success. The business impact of fraud prevention is often underestimated, but setting rules and thresholds that turn away the fraudsters while allowing legitimate transactions through makes a huge difference to any retailer’s bottom line.

Providing fraud mitigation services at the payment processor level can give the end customer a friction-free buying experience.

The problem for merchants is that sophisticated fraud solutions are often expensive, complex and difficult to manage. This presents an opportunity for online payment processors to provide a trusted fraud solution to merchants that reduces fraudulent transactions – mitigating fines or penalties from regulators – while allowing and promoting business.

Integrating this into the payment processing system will help make the process simpler for merchants to configure in a way that suits their business and reduces exposure to payment fraud.

One problem often cited by both large and small online merchants is the IT constraints they face. Smaller merchants do not have access to IT resources, and larger merchants fight for resources with other departments within the business. Integrating a fraud mitigation platform at the payment processor level reduces or eliminates the need for additional IT resources, making fraud prevention available and attainable by all merchants.

Pure-play merchants may be the least prepared

Many “pure-play” e-commerce merchants that do not have an offline presence are unaware of the incoming tide of new fraud when EMV is implemented in the U.S. This new surge in fraud could catch them by surprise and cause havoc.

Forrester expects online retail sales in the U.S. to reach $294 billion by the end of 2014, or approximately 9 percent of all sales in the U.S.,[4] while forecasting a yield of approximately $414 billion in online sales (11 percent) by 2018. Fraud always follows opportunity, and with EMV providing an extra layer of security to card-present payments, fraudsters will go after whatever they perceive to be the easiest target. Unfortunately, this often means smaller online retailers who traditionally struggle to provide high-level fraud prevention.

Payments providers that take on the responsibility and liability of secure transactions will benefit from adding value to their offering and increasing their bottom line, ensuring that the EMV opportunists have nowhere left to turn.

Fraud is migrating now – as an industry, we must respond

As evidenced by the rash of recent, large-scale data breaches, fraudsters are faster, more sophisticated and better networked than ever before. Detailed data on financial credentials and personal identities is hitting the market, making fraud reduction more and more difficult. Asking online merchants alone to fight this battle is a weak strategy. Partnering with payment processors and card schemes gives merchants a better chance of mitigating their fraud risk. At Kount we have seen fraud increase every year. The solution is not to tackle fraud in a draconian way – this will ultimately turn away legitimate customers. The key is to get the balance right. Online commerce is massive for our industry, and for the global economy it is imperative that we allow all legitimate trading to happen and stop fraud at the same time. This needs to be a collaborative effort from all parts of the payment chain and tackling fraud at the top of the chain (PSPs, banks and acquirers) will make the most difference.

Should Ticketbrokers change their Amex account to Amex OptBlue or OnePoint? Make sure you use verifyit!

If you are contacted by credit card processors telling you that you can save money with a lower Amex rate using Amex’s new programs OptBlue or OnePoint you need to first know the facts.
First let me start off by saying that I do have these options available for you if you choose that’s the way you want to go.However I strongly recommend that all ticketbrokers maintain their current independent American Express ESA Merchant Account.

The Facts

-Amex ESA means you have a direct account with Amex the other two products are bundled with your MC/Visa/Discover processing
-any credit card processor recommending these products doesn’t understand the ticketbroker industry. Your first red flag!
-with your current Amex ESA account any Amex chargebacks you receive are handled by Amex which sees both sides of the transaction. As you are probably aware that unlike MC/Visa disputes Amex almost always decides in favor of the merchant (you) if you properly document your reply.
-with OptBlue or OnePoint your Amex transactions are bundled in with your MC/Visa/Discover transactions so all chargebacks are handled by your MC/Visa/Discover processor instead of Amex.
-with your current Amex ESA you can use Amex’s great fraud tool where you can log on to and verify cardholders name, address, CVV and phone #. It’s  https://www406.americanexpress.com/aavweb/HomePage.do You must have your Amex account setup online to use this tool and be logged in for it to appear. If you don’t have its easy to setup at

You can also call Amex  at 800-528-5200 and they will help you set it up in a few minutes.
-if you switch to OptBlue or OnePoint you will no longer have access to online Amex or verifyit

The advantages of OptBlue or OnePoint

-it is true lower rates are available. With OnePoint most often you will pay 2.89% which is still higher than what you pay now.
-with OptBlue you will have a slightly lower rate than your current rate and it will be batched along with your MC/Visa/Discover transactions so you’ll get your Amex dollars one day sooner than ESA. So a day sooner than now.

In my opinion Amex ESA is by far the way to stay. And you know I’m being honest because to be truthful OptBlue and OnePoint pay me a small residual while ESA does not.

Any questions feel free to give me a call at 847-381-3482 or email bhoidas@gmail.com

INTIX Denver 2015-Fraud Panel Discussion

It was great meeting you last week at the fraud presentation and/or at my booth. Below please find information on the fraud panel discussion I had last Thursday for those that attended and in case you missed it. Thanks for the large attendance and great questions that were asked.
Here is a safe link for the Power Point presentation.

If you have any trouble opening it please let me know and I’ll send you the file directly.

INTIX Annual Conference Denver 2015

The 36th Annual Conference & Exhibition will be here before you know it! January 13-15, 2015 at the Hyatt Regency Denver Convention Center Denver, Colorado Trade Show Info
This three-day event includes a comprehensive program of sessions highlighting industry trends and innovations, an exhibition featuring companies that offer a wide range of ticketing products and services and opportunities to network with hundreds of conference attendees.I will be conducting a session on the critical topic “Prevent and Reduce your Risk of Fraud” at 10:30 Thursday Fraud Session Please arrive early for this one as the interest level is very high.

Also please stop by my Booth #315 while at the show and say hi.

Looking forward to seeing you in sunny Denver!

Confusion Over Apple Pay’s Discount

There has been some confusion about the so-called “discount” that Apple Inc. negotiated with card issuers that makes Apple Pay transactions correspond with the lower card-present (CP) rate, rather than the higher card-not-present (CNP) rate.

It is confusing. A Sept. 16, 2014, Mercator Advisory Group blog post might clarify matters a bit. In the blog, Mercator analyst Nikhil Joseph wrote that credible reports suggest Apple “seems to have negotiated with card issuers for discounts worth 15–25 basis points on each Apple Pay transaction in exchange for the reduced fraud levels ensured by Touch ID.”

Joseph went on to say that a Bank Innovation report claimed that the “networks have agreed to process all in-store Apple Pay transactions initiated via near field communication technology on the new iPhone 6 at ‘card-present’ rates. In-app purchases made through Apple Pay, however, will continue to be processed at ‘card-not-present’ rates. This is despite the fact that from a technical perspective, very little that is different is happening in either case.”

But it is clear that CP versus CNP can add up to a lot of money. “Stripe, a popular payment gateway services provider that has announced support for Apple Pay, currently charges merchants/developers 2.9 percent and 30 cents for each successful transaction it processes,” Joseph wrote. “Card-present rates for in-store credit card transactions, on the other hand, cost merchants about 2.10 percent and 10 cents per transaction a difference of more than 80 basis points. For a hypothetical merchant that does business worth $10 million annually through a mobile app with an average ticket size of $50, this difference in payment taxonomy could mean as much as $120,000 in lost profits for the year.”

CARD ISSUING BANKS PLEASE READ! Many of you are in violation of Federal Regulations E and Z!

We need to find a Lobbyist(s) to force the card issuing associations to change their antiquated chargeback regulations and procedures. Either that or a Class Action Suit needs to be filed on the behalf of merchants. As you know in the last few years some card issuing banks have begun rejecting legitimate chargeback replies even though merchants are filling the replies out in great detail proving the original charge is legitimate and the chargeback complaint should be removed and decided in favor of the merchant. It has gotten so bad that on some of the chargebacks a 5 year old child could see that the cardholder is simply trying to steal merchandise and/or services from the merchant. I have verified that many banks especially larger ones are understaffed and aren’t even reading the chargeback replies filed by merchants. They just “click and return” for prearbitration. Prearbitration is of course a “kangaroo court!”
Since MC/Visa/Discover/Amex remain sitting on their hands about this growing problem it’s time for us to fight back any way we can!Starting immediately I am advising all merchants to put the below wording in your replies to chargebacks. I wouldn’t put it in a retrieval request as that is usually a sign that the card issuer is honest and any decent reply from the merchant will satisfy the inquiry. Put it right at the top of your reply-don’t be shy. And don’t worry about being “nice!” The card issuers aren’t being nice to you so until we can get the government to force MC/Visa/Discover/Amex to rewrite their unfair antiquated chargeback policies and procedures let’s do everything we can.
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Wording to insert in Chargeback reply

By reviewing the following information in my reply you can see that this is a frivolous chargeback and if allowed to be continued by you is an obvious violation of Federal Regulations E and Z!
Card issuing banks are not allowed to encourage and condone”friendly fraud”. Your cardholder received our merchandise in a timely manner, used it and is now trying to do a chargeback basically committing felony theft on us the merchant. If this chargeback is not dismissed by you it will be immediately reported mentioning your bank to the proper authorities including The Federal Reserve and Attorney General in your state.Please find relevant links below to this matter.

TSYS chargeback guidelines

http://www.tsys.com/Downloads/upload/TSYS-WP-DisputeChargeback.pdf 

Report banks for frivolous chargebacks which is a violation of Federal Regulation E and Z

http://www.federalreserveconsumerhelp.gov/

More complaint info at

http://www.federalreserveconsumerhelp.gov/about/ConsumerHelponline.pdf 

SCAM ALERT! Beware of Michael Cooper! Chargeback Scam

NEW UPDATE 10/21/14!

Newest name and website!

http://cohen.associates/

Here is the address they use on the email they sent:

Cohen Associates, LLP

One Grand Central Place

60 E 42nd St, Suite 580

New York, NY 10165

631.865.4806 – Ext. 5552 | 631.865.1870 Fax

J.Anderson@cohen.associates

www.cohen.associates

 

THESE SCAMMERS HAVE CHANGED THEIR NAME AND WEBSITE AND ARE CURRENTLY BEING INVESTIGATED BY THE U.S. POSTAL INSPECTOR!

Their new website is http://www.ssmithassociatespa.com

There is a company out there called Homeland Arbitration, homelandarbitration.com. They are also previously known as FIAD Services and other companies all owned by Michael Cooper.

This company contacts small businesses and tells them that they will help them get all their money back for free-they just need to pay a percentage fee on the amount they recover. To recover this money, the small business sends Homeland all their CC statements and any contracts they have with any company they had spent money with. Homeland (not the small business) starts initiating frivolous chargebacks.

And it gets worse – Homeland actually changes the contract verbiage before they send it in to give them a better chance of winning the chargeback. The individual in this chargeback was called and he stated that they had changed his contracts before sending through the information for the chargeback as well. This individual also stated that he told Homeland not to initiate chargebacks and they did it anyway.

________________________________________________________________________

Here is a copy of the unsolicited email Homeland sends to people.

Dear Charlie,

I received your contact information off of a website that more than likely was built by one of the companies we are investigating. These companies are known as “Online Business Opportunity Scam” companies charging anywhere between 10 and 100 thousand dollars for marketing, coaching, mentoring, tax services, and then never providing the services that were paid for by the customer. Numerous clients have confirmed this exact scenario and I wanted to go over some qualifying questions with you regarding your website. The qualifying questions to begin an arbitration case for you are as follows:

What companies have you dealt with regarding your home based business?
When did this all begin for you?
How much do you think you have spent with all the companies you dealt with concerning your home based business?
How did you remit those payments?
Is xxxxx.com the only website you have?
What have you done so far to recover the money spent with these companies?

A little about us, there are no upfront fees for our service. We build and work the entire arbitration case from start to finish, strictly on a contingent basis. Our fee is only applicable at the point in time that the case has been won and the money has been refunded to you. Worst case scenario if we happen to lose your case, there will be NO FEE. After we receive your documents and assess your particular scenario, then we will be able to accurately quote you a fee percentage. We would send you our contingent service agreement which allows us to represent you in the arbitration case, and it would also have the quoted fee percentage. Again, you are not paying any of it upfront, it is just acknowledging that you understand what you would be responsible for at the point of time that the money has been recovered. Should you choose to accept, you would simply print it off, sign it and send it back and we would confirm and finalize your case and start filing.

Thank you.

Erik Swensen
Homeland Arbitration
4023 Kennett Pike, Suite 519
Wilmington, DE 19807

Direct Line: (302) 544-9014
Tel: (800) 659-5094 Ext. 218

Fax: (302) 300-4216
Email: eriks@homelandarbitration.com
Website: www.homelandarbitration.com

Below are links regarding this continuing scam.

http://www.ripoffreport.com/r/HomeLand-Arbitration-Michael-Cooper/Wilmington-Delaware-19807/HomeLand-Arbitration-Michael-Cooper-and-Ryan-Clark-SCAM-SCAM-SCAM-UNTRUTHFUL-COMPANY-1098137

http://www.scambook.com/report/view/285938/Homeland-Arbitration-BCA-Recovery-Owner-Michael-Cooper-Complaint-285938-for-$40,000.00

http://www.complaintsboard.com/complaints/michael-cooper-bca-recovery-pompano-beach-florida-c490703.html

http://www.ripoffreport.com/reports/specific_search/BCA%20RECOVERY/%20Michael%20Cooper

http://www.ripoffreport.com/reports/specific_search/%20MICHAEL%20COOPER

_______________________________________________________________________

If this company initiates chargebacks for your purchasers you should do the following

-When answering chargebacks include your “statement of harassment” (use those words)

-You should also get a cease & desist order against this Michael Cooper

-call police first and see if they’ll do anything

-have your attorney go to court as soon as possible. As this Michael Cooper has a track record of violations it should be relatively easy to do quickly as the court records will show his violations.

GUN CONTROL FOR SENIORS!

The old man needed some ammo for his home protection gun, so he went to the gun shop to buy some stuff.
When he got ready to pay for his purchases of gun powder and bullets,
the cashier said, “Strip down, facing me.”
Making a mental note to complain to the National Rifle Association
about gun control wackos, he did as she had instructed. When the
hysterical shrieking and alarms finally subsided, he found out that she
was referring to how he should place his credit card in the scanner.
He has been asked to shop elsewhere in the future.
crazy-old-man-funny-face