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Credit card company VisaUSA launched a new payment service this week that will provide consumers with additional security as they shop online.
The service, Verified by Visa, allows participating merchants to prompt cardholders for a password during the online checkout process. Consumers register for Verified by Visa either through their bankcard issuers or on Visas Web site.
Visa executives said the goal of adding greater online security to credit- and debit-card payments is to increase consumer confidence in online shopping. Even though merchants and banks generally absorb the loss associated with fraudulent transactions, a report released earlier this year by Gartner Inc., in Stamford, Conn., found that security and privacy concerns stopped approximately 60 percent of adults from doing business online. In addition, more than 50 percent of adults who purchase online admit they are uncomfortable doing so, according to Gartner.
“Obviously, perception is very important, and even experienced shoppers still say credit card security is still a concern,” said Jim McCarthy, senior vice president of e-Visa, the e-commerce division of VisaUSA, in San Francisco. “We are giving consumers control over their payment information.”
Currently, Verified by Visa is optional for cardholders, online retailers and its member banks. As a result, cardholders who pass on Verified by Visa will still be able to make purchases on sites that do ask for passwords. At the same time, cardholders subscribed to the service will be able to use their credit cards at sites that do not ask for additional authentication. Visa, however, did not rule out the possibility of password authentication as the norm. Its not hard to see why: While 8 cents for every $100 in overall card purchasing volumes is lost to fraud, credit card companies get stuck with 28 cents of every $100 in online purchases because of fraud, McCarthy said.
“We have a vision that someday all Visa cards will work like this, but it will be driven by market adoption,” McCarthy said. “Authentication has a tremendous curative effect on consumers and merchants, but its a question of when and how you get to that point.”
During the online checkout process, a pop-up window will launch, establishing a secure socket layer dialog between the credit card issuing bank and the consumer. The user will be prompted for a password that the bank will use to authenticate the user. If the password is correct, the bank will then authorize the merchant to proceed with the transaction.
So far, only a handful of retailers, including Dell Computer Corp. and CompUSA Inc., are participating in Verified by Visa. However, McCarthy said that merchants have everything to gain from increased consumer confidence in the security of online transactions.
The earliest adopters seemed to agree. “Consumers want to know their online purchases are secure, and getting that security should not be an inconvenience,” said Todd Penner, online marketing director for Dells Consumer Group, in Round Rock, Texas, in a statement. “Greater consumer confidence in e-commerce ultimately increased online sales.”
Verified by Visa is one of several security services in Visas secure e-commerce program. For example, Visa is looking at implementing digital certificates and biometrics, although McCarthy cautions that consumers today will not tolerate the inconveniences associated with those security technologies.
“We can roll out some very sophisticated security technologies and really lock down the online retail channel, but consumers arent ready for it,” McCarthy said. “As times and perceptions change, then we can start laying down other technologies.”