Navigating the Risks of Accepting Non-VBV Cards

The landscape of payment processing is rapidly evolving, with a surge in fintech companies and emerging payment providers offering alternatives to traditional card networks. A key consideration for merchants is whether to accept cards from providers not participating in Verified by Visa (VBV) or Mastercard SecureCode. This article provides an advisory overview of the risks and considerations when dealing with these non-traditional lenders, focusing on credit card security and fraud prevention.

Understanding the Risks

VBV and similar authentication protocols add a crucial layer of security protocols to online transactions. Without this, merchants face heightened credit risk and potential liability for chargebacks. Here’s a breakdown of the key concerns:

• Increased Fraud Exposure: Non-VBV cards lack the 3D Secure authentication, making them more vulnerable to unauthorized use. This directly impacts your risk management strategy.
• Higher Chargeback Rates: Chargebacks are more likely when cardholder data is compromised, and proving legitimate transactions becomes harder without verification steps like VBV.
• Potential for Data Breaches: Accepting cards from less secure sources can indirectly increase your exposure to data breaches; Even if your systems are secure, a compromised card could originate from a vulnerable provider.
• Compliance Challenges: Maintaining PCI compliance becomes more complex when dealing with non-standard card processing arrangements.

Due Diligence: What to Investigate

Before accepting cards from a non-VBV provider, thorough due diligence is essential. Consider these steps:

1. Financial Stability: Assess the provider’s financial health. Can they handle dispute resolution effectively and cover potential losses? Contact financial institutions for insights.
2. Security Infrastructure: Demand detailed information about their transaction security measures. What security audits and vulnerability assessments have they undergone?
3. Fraud Monitoring Systems: What proactive fraud prevention tools do they employ? Do they utilize AI-powered fraud detection?
4. Data Encryption: Ensure robust cardholder data encryption both in transit and at rest. Understand their payment gateways and how they handle sensitive information.
5. Issuer Security: Investigate the security practices of the issuing banks associated with the provider. Issuer security is paramount.
6. Legal and Regulatory Compliance: Verify they adhere to all relevant consumer protection laws and regulations.

Alternative Payment Methods & Mitigation Strategies

Explore alternative payment methods like digital wallets (Apple Pay, Google Pay) which often have strong authentication built-in. Consider these mitigation strategies:

• Address Verification System (AVS): Implement AVS to verify the billing address provided by the customer.
• Card Verification Value (CVV): Always require CVV verification.
• Geolocation Checks: Identify suspicious transactions based on location discrepancies.
• Transaction Limits: Set limits on transaction amounts, especially for new customers.
• Manual Review: Implement manual review processes for high-risk transactions.

The Role of Merchant Accounts & Payment Gateways

Your merchant accounts and payment gateways play a critical role. Ensure they support robust fraud detection and reporting. Work with providers who offer tools to help you manage credit card security effectively. Understand their policies regarding identity theft and fraud liability.

Staying Informed

The payments landscape is constantly changing. Stay updated on the latest security protocols, fraud trends, and regulatory requirements. Regularly review your risk management procedures and adapt to emerging threats.

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