Online Merchants Will Not Be Liable For Fraud In 3 Years

Here is a bold statement.

“Within three years merchants will no longer be liable for credit card fraud online”, said Skye Spear, vice president of partnerships at Signifyd

That quote in Forbes caught my attention.  Then I took a closer look at what Skye Spear and his company are doing to make that possible.  Yes, it is possible for merchants to eliminate their fraud liability but they will have to pay for it.

Signifyd offers a fraud guarantee for Online Merchants.  For a price of 50 to 100 basis points of the value of every online order, they will take on the fraud risk for the merchant.

The good news is that merchants can virtually eliminate their liability of fraud losses but they have to pay a fee of up to 1% for that opportunity.  Since some merchants have fraud losses well below those levels, the price could be prohibitive to some.

3 Companies Offer This Service Today

Signifyd is not the only company offering this service, but they might be the biggest boasting about 5,000 customers using their service today.  Forter and Riskified offer similar service which have been called Chargeback Guarantee Programs.

Complete Fraud Analysis and Guarantee

Signifyd not only offers the guarantee but gives two levels of assistance “on demand” and “complete assurance”.  For on demand, merchants simply use the service when they want the guarantee after they have already implemented their other fraud controls.  For complete assurance, merchants can outsource the whole decision on all transactions to Signifyd.

That is a pretty good range of options which are backed by Signifyd’s realtime machine learning software which can precisely identify the level of risk before an order is shipped.

They essentially turn the risk decision into a math decision.  Is the level of expected risk loss greater or lesser than 1%.  If it is, the transaction can be guaranteed.  If it isn’t the merchant should reject the transaction.

sig-mpb

Chargebacks are Reimbursed Through Claims Process

In the event the merchant is dinged for a chargeback, they simply submit a claim form to Signifyd, and within 48 hours, they get a payment for the whole cost of the Chargeback as well as shipping cost.

With 5000 customers and growing like wildfire, it appears that they are on to something here.

Frank McKenna is the Chief Fraud Strategist for PointPredictive and a Fraud Consultant based in San Diego California