Will Using 3D Secure Help Prevent Chargebacks?
The major credit card networks offer an automated fraud detection tool, known collectively as 3D Secure. Each brand has its own protection program:
3D Secure can help reduce the risk of chargebacks, but the protection isn't as comprehensive as you'd assume.
Using 3D Secure to Detect Fraud
The primary goal of 3D Secure is to detect potentially fraudulent transactions. 3D Secure helps verify the shopper’s identity and ensure the cardholder is actually participating in the transaction.
3D Secure programs, like Mastercard SecureCode, provide additional security to both online merchants and shoppers.
Mastercard SecureCode Features
- There are nearly 2 billion Mastercards in circulation.
- In the 3rd quarter of 2013, MasterCard reported consumers made 10 billion card transactions and spent more than $1 trillion ($590 billion in 6.3 billion credit card transactions and $454 billion in 5.4 billion transaction on debit cards).
Because of the network’s ever-increasing popularity among consumers, Mastercard uses 3D Secure to protect its cardholders.
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Debit and credit cardholders are asked to register their card with the Mastercard SecureCode program. When they do so, consumers will create a unique personal identification number. When cardholders shop with participating merchants, they’ll receive a pop-up window in the midst of the checkout process. Shoppers will need to enter their predetermined unique personal code in order to proceed.
Once the issuing bank validates the personal code, the shopper will be allowed to continue with the checkout. In theory, only cardholders will know the SecureCode; fraudsters shouldn’t know this number and, therefore, won’t be able to complete the transaction.
To use this fraud prevention tool, merchants simply need to contact the merchant processor and ask for permission to use Mastercard SecureCode (or any other 3D Secure program). Merchants will need to install a plug-in, but the process is fairly painless.
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Using Mastercard SecureCode to Prevent Chargebacks
Card networks that offer 3D Secure boast its chargeback-preventing capabilities. By detecting potential fraud and stopping these unauthorized transactions before they’re completed, merchants are spared the corresponding chargebacks.
It’s true that using Mastercard SecureCode can help prevent chargebacks—but there is a caveat.
Even Mastercard admits this fraud prevention tool can only offer so much protection. The network says the use of Mastercard SecureCode will help reduce the risk of “cardholder unauthorized” or “cardholder not recognized” chargebacks.
That means the merchant is still susceptible to a lot of other chargeback reason codes!
Plus, Mastercard SecureCode will, understandably, only prevent chargebacks from Mastercard cardholders. Merchants can still get hit with chargebacks from cardholders in any other network.
If you want to establish sustainable growth, contact Chargebacks911®. We’ll create a chargeback management system to combat all chargebacks, not just the ones originating from a single card network.
Using Mastercard SecureCode and the other 3D Secure tools will help reduce the risk of chargebacks, but incorporating these fraud detection programs into an all-inclusive chargeback management effort is a more profitable strategy.