Explanation of MasterCard SecureCode & Verified by Visa

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1 Explanation of MasterCard SecureCode & Verified by Visa Version: 2.2 Year: 2012 Author: Buckaroo Online Payment Services

2 Online acceptance of MasterCard SecureCode and Verified by Visa Unfortunately, online fraud is still a problem and can be a major expense for you as a business owner. Let us help you to substantially reduce the risks with MasterCard SecureCode and Verified by Visa two services provided by Buckaroo that have been specifically developed to help customers shop safely online. MasterCard SecureCode and Verified by Visa are unique standards which achieve what was previously impossible with online orders: identification and authentication. What it boils down to is this: MasterCard SecureCode and Verified by Visa enable the card issuer to confirm that your buyer is the rightful holder of the credit card being used. Current versus new system So how does this differ from the current system? At the moment, an approved transaction means that the credit limit has not been exceeded and payment is made by the rightful card holder. Unlike offline shops, online merchants are not able to carry out additional checks, such as comparing the signature on the card with that on the receipt and or asking for ID. If a customer afterwards denies having made the purchase, it is in many cases very difficult to prove the opposite. After all, you do not have a signed receipt. These kinds of disputes (charge backs) affect your financial security. There is, however, something you can do about this. This is why Buckaroo supports the latest MasterCard and Visa services for secure online payment: MasterCard SecureCode and Verified by Visa. MasterCard SecureCode and Verified by Visa MasterCard SecureCode and Verified by Visa do what was previously impossible in the virtual world: they positively identify the card holder and generate proof of the transaction. For you as an Internet merchant, the benefits are huge: fewer charge backs and therefore greater financial certainty. And all without making major demands on anybody concerned. In fact, payments are settled just as quickly as they are now. This document contains detailed information on these schemes. We encourage you to flip through the pages and discover what MasterCard SecureCode and Verified by Visa can do for you. Explanation of MasterCard SecureCode & Verified by Visa 2 of 6

3 What do MasterCard SecureCode and Verified by Visa do? The new systems comply with a number of conditions. They provide security for all concerned, ensure that the procedure is straightforward and available for use all over the world. A merchant in Norway has to be able to sell to, say, a customer in Brazil and both need to be sure who they are doing business with. Moreover, the consumer should be able to order from anywhere, without being tied to one particular PC. How does the identification process work? All participants, both businesses and consumers, are registered in central databases operated by MasterCard and Visa. The consumer records include a number of specific details. Their registration is handled by the card issuers themselves. The merchant also has a unique identification number. This is provided by the issuer with which they have a merchant contract. Together, the registered details contain all the data needed to check both parties to a transaction. However, this does not in itself provide a conclusive data check. For that, special software known as the Merchant Plug-In (MPI) has been developed. Linked to the merchant s payment system, this allows the details of both parties to be compared with that in the central database. How does proof of payment come about? Generating a proof of payment is done in the following way. The MPI contacts the issuer and asks it to confirm the buyer s identity. If that process is successful, the MPI receives a sort of electronic authorisation stamp the perfect alternative to the signed paper receipt. How it works in practice A consumer selects a product in your web shop, adds it to his shopping trolley and proceeds to the checkout page. At the checkout, he opts to pay by MasterCard SecureCode or Verified by Visa. Once the card details have been entered, a check is made to see if the card holder is protected by MasterCard SecureCode or Verified by Visa. If that is the case, the consumer is asked to enter his personal code. This data is securely protected and never revealed to merchants. Once the personal code has been entered, contact is made with the card issuer. Identification now takes place. If everything is in order, the bank issues an authorisation stamp for the payment. Note that such a stamp is valid for one payment only. You now need to request merchant authorisation for the transaction. To do so, you resubmit the unique authorisation stamp code. This gives the card issuer another chance to check that the code you have is the one issued for this transaction. Explanation of MasterCard SecureCode & Verified by Visa 3 of 6

4 How do you provide MasterCard SecureCode and Verified by Visa in your web shop? Buckaroo s role As a merchant, you are using Buckaroo s services to receive and process online payments. Buckaroo is a so-called Payment Service Provider (PSP) with an MPI, which enables you to use MasterCard SecureCode and Verified by Visa. The credit card acquirer role First of all, you need to have an agreement with Buckaroo for the acceptance of MasterCard and Visa. Subsequently, Buckaroo provides the credit card acquirer with a list of merchants that wish to use MasterCard SecureCode and Verified by Visa. The credit card acquirer then registers these merchants with MasterCard and Visa as official participants in the schemes. Once this has been done, the credit card acquirer notifies Buckaroo. Buckaroo then activates the MPI for your web shop and notifies you as soon as everything is up and running. Explanation of MasterCard SecureCode & Verified by Visa 4 of 6

5 Advantages and rules Charge back protection With MasterCard SecureCode and Verified by Visa, you finally have proof of transaction for the first time. If a card holder claims that he did not make the purchase, both the issuer and card holder need to be able to prove that. Unlike before, you now have to do absolutely nothing. That is because you hold the unique code provided by the issuer with which the transaction is undeniable. What does not change is that the card holder can claim a charge back if the order is not fulfilled, late of defective. We assume, however, that you will resolve such issues with the customer. We strongly recommend that you act to avoid misunderstandings. A clear policy on complaints, guarantees and returns always works in your favour. What if the consumer/card holder is not a member of the schemes? Unfortunately, not every card holder has joined MasterCard SecureCode and Verified by Visa yet. But the number is growing fast, not least because MasterCard and Visa are making their use compulsory in more and more countries! Even then, we have good news for you. If the transaction is conducted using a credit card that is not a 3D-Secure participant, you retain the charge back benefit. You do not receive the unique code, of course, but you can prove through the MPI that you requested identification and a proof of transaction. And that is sufficient, even if you have not received it. So even if the consumer later claims that he did not make the transaction, you still have charge back protection and can be sure of receiving your money. In addition to the above rules, a number of further conditions apply. These are mainly concerned with Buckaroo s automated process. For clarity, here are the rules and conditions. If you comply with all of these, you enjoy charge back protection. If a transaction has been done by credit card and the issuer cannot confirm the authenticity of the transaction and the card holder denies the transaction, you still have charge back protection as long as the following conditions are met: Charge backs Charge backs with as reason: Card holder denies purchase. The reason codes for this are: MasterCard , Visa Card holder does not recognise the transaction. The reason codes for this are: MasterCard , Visa Explanation of MasterCard SecureCode & Verified by Visa 5 of 6

6 Countries Countries/regions that participate in the MasterCard SecureCode and Verified by Visa schemes: MasterCard: The payment guarantee applies throughout the world for MasterCard consumer cards and for all commercial* cards within Europe, even when a card holder is not a participant of MasterCard SecureCode. Visa: The payment guarantee applies throughout the world for Visa consumer cards and for all commercial Visa cards within Europe, even when a card holder is not a participant of Verified by Visa. * Unfortunately, it is not possible for participants to see beforehand if the credit card is a consumer card or a commercial card. As participants in the scheme, merchants are required to have the MasterCard SecureCode and/or Verified by Visa logo displayed on their websites. The logo(s) will be provided by Buckaroo by . Charge backs and you If the credit card acquirer receives a charge back claim but you have complied with all the rules of MasterCard SecureCode and Verified by Visa, then in most cases you will not even notice the procedure. This is because they hold enough details to verify that the transaction has indeed taken place. In some cases, however, the credit card acquirer may ask you to provide additional information. This will usually be data recorded by the MPI, for example, the information about your attempt to verify the card holder s identity or your request for a proof of transaction (the authorisation stamp ), which was not fulfilled because the card holder was not a member of the relevant scheme. Explanation of MasterCard SecureCode & Verified by Visa 6 of 6