December 31, 2003, 12:00 AM

Securing Payment

(Page 3 of 3)

Most of the retailers that have signed up for Verified by Visa thus far have been big retailers that have the internal resources to develop the software links to participate. One of Visa’s priorities now is to work with the large merchant payment processors and card acquirers to develop common links that can be used by the small retailers they serve. Wells Fargo Bank, for example, announced in early December it was developing a link to Verified by Visa for its global payment gateway to assist retailers for which it provides payments processing services.

Smart cards

While the password programs are all similar, including the new one announced by JCB Co. .Ltd. (see box), there are some differences in the rules. All three, for instance, use the same 3D secure card standard for password-protected transactions. But outside of the U.S., MasterCard will begin using a smart card-based system right away.

MasterCard’s European cardholders can use smart card readers as part of their approval. In this case, cardholders insert their cards in a reader attached to their computer and enter their password. The reader will determine the identity of the user offline, then send an encrypted message to the issuer. Already, two European institutions are piloting the smart card version. For U.S. retailers selling in Europe, the transactions will all look the same. “The retailer will never know if a smart card was used,” Rutherford says.

By contrast, while Verified by Visa is smart-card compatible, no issuers are using smart cards for Internet authentication today and there are no immediate plans for any to do so. If smart cards are used in the future, they will look the same as other transactions to the merchant, McCarthy says.

In other rules differences, MasterCard is only giving liability shifts in the U.S. on transactions on “fully authenticated transactions”-where both the card issuer and the merchant are participating in the program. And it will allow all merchants to participate, even those with high chargeback levels.

While MasterCard got started about a year behind Visa, the next year will be crucial. “We know this won’t happen overnight, but the next two years will be critical to driving adoption.” Rutherford says.

And for many retailers, greater consumer adoption is what they want most.

Lauri Giesen is a Libertyville, Ill.-based freelance business writer.


JCB joins the password movement

Even though password-protected Internet transactions have still to be proven in the marketplace, other card organizations are going ahead with similar initiatives.

The latest: Japan-based JCB Co. Ltd. in November announced its J/Secure program after observing the Visa effort. “We saw this year that merchants were embracing Verified by Visa and wanted to go ahead with a similar program,” says Julie Kruger, JCB vice president. JCB will begin its rollout in Japan and Korea in January and move to U.S. cardholders in the second quarter.

JCB has 48 million cards, 45 million of which are in Japan. Most of the U.S. cards are corporate cards issued to American employees of Japanese companies. And unlike Visa and MasterCard, which have to persuade thousands of card issuers to get on board with their programs, JCB’s job will be easier because it issues about half of the 48 million cards itself. The remainder are issued by partnering financial institutions.

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