CVV Number
Ever wonder why online merchants ask for your CVV? Now that you are a merchant yourself, it’s important to understand what the CVV is exactly and how it works.
CVV stands for Card Verification Value. It is typically a three to four-digit number located on the back of a credit card. Most major credit card companies began requiring CVVs for card-not-present transactions in 2018 because it is meant to be a two-factor authentication layer of protection against fraud.
How a CVV works?
In addition to asking for a credit card number and expiration date, most merchants should ask for a CVV as a third layer of protection. CVVs are usually only found on the physical card, so if a customer can give it correctly, they most likely have physical possession of the card. If the input CVV does not match up with the card number, then the transaction will cancel.
While a CVV does not completely prevent against identity theft if one were to lose their card or a thief found another way to obtain the number, it does provide that extra layer of security. It is specifically useful in card-not-present transactions, since it is otherwise hard to verify a customer’s identity and possession of the card without swiping, chipping, or scanning it.
How the CVV helps merchants?
The CVV is not only meant to be a useful tool to keep customers safe, however. It protects merchants as well. Fraudulent purchases have continued to increase, especially online, which is why credit card companies began requiring CVV usage in the first place. Currently, the cost of fraud is up 7.3 percent in 2020 from 2019 in the United States. On average, every one dollar of fraud costs retailers $3.36. This can get pretty expensive for businesses.
Asking for the CVV helps protect against such fraudulent activity. It nearly proves that the card is in the physical possession of its owner. This can lower your chances of dealing with frauds and losing money on the deal.
CVVs also help prevent chargebacks, which is the transfer of funds in the opposite direction when requested by the buyer or the card issuer. This usually happens because a purchase was unauthorized, or the issuer notices something unusual about the transaction. A CVV code can’t prevent all chargebacks since they happen for many different reasons, but it eliminates a popular one, which is fraud suspicion. It also helps protect you from “friendly fraud,” which is when the customer claims they didn’t purchase from you, but in fact did—which you can prove thanks to the CVV code.
eCommerce Transactions
If you have a presence online, it is vital for you to have a PCI compliant processor that requires a CVV code. Online sales are the most common forms of card-not-present transactions, and without being able to verify the cardholder’s identity, the CVV comes in handy to protect against fraudulent activity. Small businesses in particular are the biggest targets of frauds and identity thieves because they look for vulnerabilities within their online presence.
