A new rule by Visa that will relieve merchants of liability if a bank fails to respond to a Verified by Visa authorization request is getting merchants’ attention. But merchants are still wary putting another step into the checkout process.
Visa and MasterCard are offering incentives to merchants to participate in new cardholder identity authorization programs, with Visa in April instituting new rules that will not hold the merchant liable for fraudulent transactions if a bank fails to respond to a request for authorization through the Verified by Visa program.
Under Verified by Visa and MasterCard SecureCode, cardholders register their cards with their issuing banks, then choose a password to input when checking out at an online merchant. The merchant’s system must be capable of providing a dialogue box prompting customers for a password. Merchants have no liability if the customer inputs a password, the bank OKs the transaction then the transaction goes bad. Under the new rules, if the customer inputs a password and the bank fails to approve or decline, the merchant can accept the transaction and not be held liable. The rule change “is a defining moment in payments history,” says John Shirey, corporate manager of product development for Dallas-based Paymentech L.P., a payments processor. “It’s a big shift.”
Whether the change will attract merchants is still uncertain. Processors say it has not generated excitement yet. “Merchants to date have not knocked on our doors in droves over for this,” Shirey says.
Processors say that merchants are waiting to see how several issues play out. For one thing, they are skeptical of placing any additional steps in the path of checkout, and this system requires customers to enter a password in a dialogue box before proceeding. “Adding a step has been a concern that has come up in our discussions with merchants,” Shirey says. “They tell us, ‘I don’t want anyone interfering with my shopping experience.’”
Processors note that the cost to merchants of implementing Verified by Visa and MasterCard SecureCode is low and the implementation is easy. But many retailers are waiting to see how much support issuing banks put behind the programs. “This has been a slow process, because of lot of different components need to support it for it to work-the issuing bank, the merchant bank, the merchant and the cardholder,” says Robert Renzulli, vice president of product development for First National Merchant Solutions, the merchant acquiring division of First National Bank of Omaha. “You need all four of them on board, and right now you don’t have that. Each side wants a critical mass of support from the others.”
Merchants and cardholders alike need to be sold on the benefits of such programs, processors say. ““The challenge for the card associations is to convince the public that there is a real benefit to them if they participate in the program,” says Tony Abruzzio, executive vice president and general manager of GO Software Inc., which targets small to mid-sized merchants with a payments processing program that runs on PCs. “They simply have to make a more compelling case to the consumer and the merchant for this thing to take off. If that adds a real value to the consumer and merchant for participating in the program, then it might go.”