First of all, new consumers habits
It’s the code that revolutionized online shopping and even opened it up to a wider audience. It was the irrefutable argument that enabled banks and e-commerce websites to convince their most cautious customers to indulge in online shopping.
E-commerce has revolutionized the way in which we act as consumers, even to the extent of encouraging bricks and mortar retailers to become so-called “phygital” businesses. In other words, developing an e-commerce website for “clicks ‘n bricks,” promoting online sales alongside their in-store offerings.
There are many benefits to this approach: free deliveries and returns for purchases, virtually limitless stock and ease of purchasing, 24×7. And, in particular, a guarantee that cannot be overlooked: you can be confident that you won’t have to stand in line to pay for your purchases!
Furthermore, if you take into consideration the widespread discounting online, your item will be generally cheaper online than in stores.
The flaws of the online world
In fact, there’s virtually no downside — except that online purchases are still riskier than those in stores. Personal data is very difficult to protect from risks such as hacking and identity theft, including the theft of bank details.
Ultimately, a solution was found in the form of 3D Secure. This authentication system involved sending an SMS to the cellphone number linked to the bank account. It would send a code to the recipient to enable the purchase to be approved. The system was designed to reduce the risks of fraudulent card use by third parties. Besides, it has been launching in France on October 1st, 2008. The French payments regulator, OSMP, estimates that 30% of all transactions were subjected to this verification process in 2017.
3D Secure is no longer with us
Or in any event, it will soon be gone for good. Even though it is restrictive, with the requirement to have access to a cellphone, its use had become a matter of routine for consumers. However, the European Bank has publicly rejected it as a solution. The bank is of the view that 3D Secure is no longer fit for purpose. Due to its vulnerability to attacks, particularly during peak usage periods, network operators’ servers are a big risk. The aim is to replace SMS-OTP (one-time passwords) during the second half of 2019. Although Bertrand Pineau, Monitoring, Information and Development Manager at FEVAD E-Commerce Europe is more cautious, stating that “it will take years, rather than months, to abandon the technology completely.”
Several stakeholders are considering new technological advances to overcome failings in the system:
- FEVAD (E-Commerce Europe or the Federation of E-Commerce and Distance Selling)
- CB Bank Cards Group
- Bank of France
- consumer associations
- online retailers
- banks, card issuers, and payment service providers.
Moving toward a revised 3D Secure
Banks’ ability to trace their customers’ purchasing habits might be referred to as 3D Secure v2.0. Technology already has sufficient autonomy to determine whether strong authentication is required at the time of purchase. Indeed, this technology aims to regulate payments. It will not help compulsive shoppers to manage their budgets. Notwithstanding, it will establish a risk profile to prevent possible fraudulent purchases.
Dynamic card verification
For the last few months, BNP Paribas has been discreetly offering a BNP Net card with a card verification value that changes regularly? As a reminder, CVV is the three figures on the reverse of the card, which are essential for all online purchases. This innovation is designed to prevent the theft of bank details and possible fraudulent use. The card is powered by a lithium battery and the CVV changes no matter how frequently you make purchases.
Société Générale is also offering a similar card, with the only difference being the price (€12/year, vs €7.50 for the BNP card). Moreover, Société Générale provides the ability to add dynamic card verification to the back of a customer’s card as an option to a standard card. While BNP only offers this security solution with its BNP Net model.
Biometric cards: an exception to the rule
This card features a fingerprint sensor to make payments easier. With a quick launch and rapid customer uptake expected, it should be offered by some banks by early 2019. iPhones already feature this fingerprint recognition to lock and unlock phones. It means that the system is already highly rated. It has already proved itself in the world of smartphones. Nevertheless, it seems a safe bet that this will be the least popular solution. Indeed, not all current cellphones are provided with this technology despite its widespread availability.
Safer, but more complex
Text messaging will be replaced by three-phase verification, with two phases being mandatory:
- Knowledge (secret questions or passwords);
- Possession (device identification, the purchaser’s own property, e.g.: IP address of a computer, smartphone or tablet);
- Biometrics (iris, face or fingerprint recognition).
The main disadvantage is the longer checkout process for the customer, leading to a potential loss of custom when buyers are inconvenienced.
Indeed, the logic of e-commerce is to focus on high conversion rates by ensuring that the purchase process flows smoothly. If this approach is implemented, it is certain that the greater complexity and additional verification stages will increase cart abandonment rates, leading to major losses for retailers who will undoubtedly greet the arrival of this system with trepidation.