IE 11 Not Supported

For optimal browsing, we recommend Chrome, Firefox or Safari browsers.
Sponsor Content
What does this mean?

Authenticating Cardholder Data Can Help Reduce E-Commerce Fraud

1440-600-image-govtech (002).jpg

Digital payments in the U.S. have increased significantly, reaching a penetration of 78 percent in 2020, according to McKinsey’s annual Digital Payments Consumer Survey.

Digital payments in the U.S. have increased significantly, reaching a penetration of 78 percent in 2020, according to McKinsey’s annual Digital Payments Consumer Survey. As was the case with many things, digital commerce in the United States has been accelerated by the pandemic and technological innovations that make these transactions seamless and simple.

But the exciting growth of digital payments, which is defined as a browser-based, in-app online, digital wallet or person-to-person payment, is threatened by the parallel rise of online fraud. In the last year alone, experts predict online fraud represents a $20 billion problem.1 Payment fraud began moving online when EMV technology was implemented back in 2015 in the U.S. for in-person purchases. EMV was so successful in decreasing card-present fraud that it pushed payment fraudsters to online transactions.

The COVID-19 pandemic further added to the rise of online fraud when Internet traffic surged 60 percent2 and more employees began working remotely with fewer security controls in place. With commerce, including government payments, shifting to online environments more rapidly than ever, digital card-not-present transactions also increased and many environments were left vulnerable to fraudulent activity.


While fraudsters are developing sophisticated new scams like credential stuffing (mass payment authorization attempts to verify stolen accounts) and streaming potlucks (unauthorized sharing of streaming subscriptions), the most common and concerning type of online fraud is old school. Known as friendly fraud, this is when a cardholder claims a charge is fraudulent when in fact it was a legitimate transaction.

Friendly fraud accounts for up to 75 percent of all chargebacks.3 It’s an expensive type of fraud, with businesses and government agencies losing around 84 percent of all chargeback disputes4 — resulting in a loss of inventory and additional processing fees. Friendly fraud is quickly becoming a major problem. Over the last three years, nearly 80 percent of businesses have seen an increase in friendly fraud attacks, while 68 percent blame the pandemic for a spike in their chargeback rates.5


Research shows e-commerce and digital payments in the U.S. rose nearly 32 percent in 2020,6 and the trend is only expected to continue throughout 2021 and beyond. Fortunately, government agencies can take advantage of the rise in digital payments growth while protecting themselves from all types of transaction fraud, including friendly fraud.

According to a recent IBM study, companies with a formal security strategy fare better, experiencing almost a 50 percent reduction in the cost of a data breach event when one occurs.7 Yet, despite the strong evidence for advanced security measures, just 21 percent of businesses have fully deployed security automation/breach orchestration platforms.8

When developing a security strategy for digital transactions, it’s important that any protective tools also help to reduce false declines and unnecessary friction that impede a smooth transaction for online customers. This will support a fast, easy and convenient checkout experience that keeps citizens satisfied.


Thanks to innovations in payment technology, there are many ways a government agency can fight fraud and protect cardholder data while offering citizens seamless digital payment transactions. One of the best tools available today is EMV 3-D Secure. Improving upon the older 3-D Secure (commonly known as Verified by Visa or Mastercard SecureCode, among others), the updated version offers a smoother user experience and now adapts to a wide variety of devices, including mobile.

EMV 3-D Secure uses 10 times more assessment data points than the previous version, allowing for risk-based authentication by the card-issuing bank. After the cardholder submits their information on the merchant payment page, it is sent to the issuing bank, which decides if there is adequate data to determine if the purchase is being made by the true cardholder in order to authenticate and then authorize the cardholder’s transaction.

EMV 3-D Secure also relies on enhanced frictionless security such as biometrics, which is easy for cardholders to use and means customers don’t have to remember complicated passwords. These extra security features decrease the overall risk of fraud and friendly fraud specifically, since agencies that accept the strongly authenticated transactions are less vulnerable to losing potential chargeback disputes.

Government agencies incorporating this new tool into their digital payments flow are already reporting impressive results, including checkout times reduced by 85 percent and cart abandonment lowered by 70 percent.9 By providing customers with simple, secure online checkouts, EMV 3-D Secure allows agencies to better protect against fraud, reduce chargeback liability, increase payment authorization rates and ultimately drive online revenue.

To learn more about the benefits of EMV 3-D Secure for your agency and how to get started, read this white paper.

By selecting or clicking links within this document you will leave U.S. Bank content and enter a third-party website. U.S. Bank is not responsible for the content of or products and services provided by this third party, nor does it guarantee the system availability or accuracy of information contained in the site. This website is not controlled by U.S. Bank. Please note that the third-party website may have privacy and information security policies that differ from those of U.S. Bank.