The security standard Verified by Visa, used to authenticate e-commerce transactions, is winning recruits from retailers and aggregators as fraud continues to hamper online purchasing.
Those launching the service recently include retailers Hotwire, NewEgg, Cooking.com and Beach Camera as well as e-commerce outsourcers such as GSI Commerce and Alliance Entertainment along with payment processor Official Payments. Older users include Walmart.com, JetBlue Airlines, Northwest Airlines, Zales.com and 1-800-Flowers.com.
“With things like spam, ID theft and phishing, at some point if we don't start to make consumers feel more comfortable, there's some belief that we could slow the growth, over time, in the e-commerce channel,” said Jim McCarthy, senior vice president of emerging products at Visa USA, San Francisco. “We've got to make consumers feel better. And so with zero liability, it's a great message to tell consumers that you're protected, that you have no financial risk.”
Fraud is a serious concern. In offline transactions, 7 cents is lost on every $100 charged to Visa cards. Online, the estimated fraud is 30 cents for every $100 spent using Visa.
Introduced in 2001, Verified by Visa uses consumer-created personal passwords, identity information and encryption to help protect Visa credit and debit cards against fraudulent use. Consumers registering their existing Visa cards can confirm their identity when shopping online through a password.
Visa's zero liability policy applies to all transactions in offline and online channels, protecting cardholders from liability stemming from fraudulent transactions. Verified by Visa is free to cardholders, but banks and merchants pay to use the code online.
Four million Visa cardholders, mainly in the United States, have signed up with their card-issuing banks to create passwords for Verified by Visa. The banks have pre-enrolled 350 million cards worldwide, 250 million of them in the United States. But cardholders must activate and create a password.
Verified by Visa volume through the third quarter was $5.4 billion out of total Visa e-commerce volume of $55 billion. Volume rose 194 percent year over year. The average transaction was $175 compared with $90 for non-Verified by Visa transactions.
An estimated 25,000 retailers use Verified by Visa, 17,500 of them in the United States. Merchants benefit through a reduction in losses from chargebacks — when the cardholder disputes a transaction.
Merchants, Visa and the 10,000 participating card-issuing banks worldwide are marketing for wider consumer acceptance of Verified by Visa. Visa dropped 22 million inserts in statements to its cardholders in the United States in the past two months.