Article: Ethoca Fraud Fighting for Issuers/Merchants
As seen in The Nilson Report: April 2016 / Issue 1084
Merchants in 37 countries and issuers in 12 countries comprise the participants in Ethoca’s network, which gives merchants an early warning of possible fraudulent transactions as well as information about previously confirmed customer disputes. Among the more than 3,500 merchants participating are 7 of the top 10 ecommerce sellers worldwide. Among the card issuers are 7 of the largest 10 in the U.S., 8 in Canada, 8 in the U.K., and 3 in Australia. Expansion continues this year to other countries in Europe and Asia.
Merchants benefit when they can resolve disputes before they become more expensive chargebacks. Issuers benefit from a reduction in operational costs tied to chargebacks. It is common for customer relationship staff to handle multiple calls related to a single chargeback. Ethoca can help reduce that to one call. Issuers also benefit from faster recovery of fraud losses.
Ethoca has been signing merchants and issuers directly to contribute their data and to participate in Ethoca Alerts. Now, it has started to grow its contributor base through partnerships. A contract with Pegasystems brings data from issuers that use Pegasystems’ Smart Dispute for Issuer product, which greatly reduces issuer labor costs related to disputed transactions.
That same transmission of data between an issuer and Pegasystems is now extended to Ethoca, with no need for creation of another file or an application program interface.
A link between Ethoca and TSYS, the global card account processor, accomplishes the same results as the Pegasystems partnership, and also without issuers needing a link to Ethoca. Using data from TSYS and Pegasystems received in near real-time enables Ethoca to help issuers more quickly recover fraud and dispute-related losses. Concurrently, merchants get actionable data more quickly.
Ethoca revenues come from merchants and issuers. It receives 40% of recovered value of goods it stops from being shipped to fraudsters. For lower-value digital transactions, it receives a per transaction fee. Card issuers also pay Ethoca a percentage of the recovered value.
An expected uptake in the number of merchants deploying 3D Secure technologies to combat rising card-not-present (CNP) fraud is expected to benefit Ethoca. There is no recovery by issuers of fraud losses in CNP transactions involving 3D Secure transactions. Ethoca promises to minimize those CNP losses. The rising number of transactions valued at under $25 will also increase Ethoca’s value to issuers. Currently, internal costs involving disputed low-value transactions outweigh any recovered funds, leaving issuers stuck with absorbing the losses.