Card fraud has become as commonplace in South Africa as load shedding and, according to the SA Banking Risk Information Centre, losses due to fraud have increased by 23% to R453.9 million.
To combat this, the Payments Association of South Africa (PASA) put in a February 28 2014 deadline for all merchants to implement 3D Secure.
Nine months later, there is still limited compliance and penalties have been introduced with a R100, 000 one-off fine per merchant and R50, 000 fine per month, per merchant thereafter.
Consumers and merchants know 3D Secure as the extra step between the product and the purchase.
That layer that makes sure the cardholder is who they say they are, that the merchant receives their payment as they should, and that fraud is given the cold shoulder right from the outset.
However, this system is not as simple as it should be, nor does it entirely eliminate fraud. It is accompanied by complexity, mercurial issues and a looming deadline with a hefty price tag.
The 1st of March was the deadline for 3D Secure implementations before the penalties kicked in.
Many are wondering if PASA will be lenient or strict.
Either way, the solution is now being enforced in spite of resistance from some of South Africa’s biggest companies and even banks are getting in on the act – First National Bank has officially stated that it will be passing on any non-compliance fines directly to any of their e-commerce merchants that have not implemented 3D Secure.
However, there are still some concerns around the adoption of this technology and these are inhibiting its uptake.
“There are a number of issues around 3D Secure, not least of which being how complex it is to use and integrate and manage,” says Johan Dekker at PayU.
“The roll out should have been better managed, possibly with a more phased approach, and the penalty system was never disclosed so now we have merchants who can’t go live because they’re not prepared for 3D Secure, or correctly configured with Visa or MasterCard.”
That said, however, there are also enormous benefits to merchants and consumers from 3D Secure.
It will reduce risk and support the industry as a whole in securing transactions and lowering the total cost of fraud. The technology has also undergone some changes, many of which show how it has paid attention to consumer and merchant complaints.
“They have made improvements, previously consumers had to enrol their card and now they are pre-enrolled which makes it a lot easier,” says Dekker.
“The pages are a lot more responsive and the user experience has become a lot better, especially on smaller devices such as tablets or mobile phones.
Also, removing the password option that was mandatory with the old technology has made the system less prone to phishing, hacking and viruses.”
Dekker believes that customers need to be educated on the benefits of 3D Secure and how it is making online an exceptionally safe place to shop.
“Card transactions are the safest on the market for the consumer as the onus is on the merchant,” he adds. “For the merchant, 3D Secure is a great mechanism to limit risk where before they would have been liable for all these payments.”
PayU has removed a lot of complexity for merchants with plenty of testing across 40 different scenarios and three types of risk setting on the system – high, medium and low, dependent on merchant preference. And the customer?
“I don’t really think of 3D Secure at all,” says Janine Jackson, 40-year old consultant. “I just want my card to work and for money not to be stolen out of it.”
Ecommerce merchants, electronic payment partners and shoppers will be hoping that once widespread implementation of 3D Secure is in place, that this is exactly what happens.