Visa, MasterCard boost participation in security plan through 3rd parties
By reaching out to small retailers through web site aggregators like 2Checkout.com, Visa expects to nearly triple the number of online merchants participating in its Verified by Visa password security system in time for this year’s Christmas shopping season, Jim McCarthy, senior vice president of emerging technology, tells InternetRetailer.com. “We expect to have close to 50,000 merchants for the holiday season, up from 17,000 today,” he says.
Taking similar measures, MasterCard expects to more than double its number of merchants using SecureCode over the next few days, says Tom Maxwell, director of e-commerce and emerging technologies. Cardholders participating in the Verified by Visa and SecureCode programs enter their passwords into a web page window as part of the checkout process, which serves to authenticate the cardholder’s identity. Merchants participating in the programs are not liable for fraudulent chargebacks (whether or not cardholders and issuers also participate).
Visa has elicited participation in Verified by Visa from most of its credit card issuers, with more than 9,000 issuers out 14,000 worldwide offering the service to some 250 million credit and debit cardholders. “But on the merchant side, we still have a long way to go,” McCarthy says.
The lack of merchant participation so far has left the volume of Visa transactions processed with Verified by Visa at only 5% of Visa’s total e-commerce volume, or $1.1 billion out of $22 billion per quarter. Although large retailers are more likely than smaller ones to offer the service, the largest 100 retailers process less than 50% of their online transactions with it, McCarthy says.
But by working through web site aggregators and shopping malls like 2Checkout.com and other service providers, Visa expects to sharply increase the number of small merchants participating in Verified by Visa, McCarthy says. “When 2Checkout.com comes live with Verified by Visa this week, it will bring in close to 10,000 mom-and-pop retailers,” he says.
Because 2Checkout.com handles payment transactions and fraud management for its 13,000 client merchants, none of them has to install any software to participate in Verified by Visa, says Kristin Dach, CFO and COO of the 4-year-old company. But 2Checkout will not charge its merchants additional fees for using Verified by Visa or MasterCard’s SecureCode, which it plans to implement later this year.
2Checkout will pay a $5,000 annual fee to e-commerce services provider Retail Decisions to use software from Arcot Systems Inc. to run both the Verified by Visa and SecureCode programs, Dach says. The software fee is tied to a package that included a $23,000 upgrade of its Retail Decisions Live Processor e-commerce software to accommodate its move to the password-based transaction systems, Dach says, adding that most of the upgrade was due to the technical requirements of integrating with the SecureCode system.
2Checkout charges its merchants a 5.5% commission on the selling price of products, plus 45 cents per transaction. And though it doesn’t charge any additional fees related to the password programs, it expects to realize a return on its investment in Verified by Visa and SecureCode within six months, Dach says. 2Checkout expects to save about $2,000 per month from Visa’s 5-basis-point discount in its interchange rate for Verified by Visa transactions, plus it continues to benefit from an extremely low chargeback rate. MasterCard also offers a variety of discounts for international transactions processed through SecureCode, a spokesman says.
Visa and MasterCard are also working with payment services provider Authorize.net, and e-commerce platform providers Digital River and CyberSource Corp., among others, to bring in additional merchants. Visa says it`s also talking with additional site aggregators.
Authorize.net is partnering with software vendor CardinalCommerce, which provides the software that merchants need to process Verified by Visa and SecureCode passwords.
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