What Are Card Security Codes?
How Do Card Security Codes Aid In Preventing Chargebacks?
Card security codes exist to do exactly as you might think: to keep the card data secure. The addition of card security codes has become a standard practice for card networks and issuers to help protect shoppers when paying online.
Where Do I Find Mine?
Card security codes are printed somewhere on nearly every payment card out there.
For Visa, MasterCard, and Discover cards, the card security code is a three digit number printed on the back side of the card at the very end of the magnetic strip running lengthwise. For American Express cards, however, the card security code is printed above the card number itself, located in the top right hand area of the front of the card.
Unlike all of the other cardholder information, card security codes are printed, not embossed.
The numbers used for each card network vary slightly:
|Card Security Codes|
|Visa||CVV2||Card Verification Value2|
|MasterCard||CVC2||Card Validation Code2|
|Discover||CMID||Card Member ID|
|American Express||CID||Card Identification Number|
How Do They Protect Me?
Card security codes first appeared in 1997, and were adopted by the major card networks by the early 2000’s. The short 3-4 digit codes are used to protect cardholders from fraud, particularly in the card-not-present arena. They do so because card security codes are not encrypted into the information stored in the magnetic strip on the back of each card. Because this number is entirely separate, someone using it to make a purchase would theoretically have to be in possession of the card itself.
Additionally, merchants are prohibited from storing the card security codes when recording consumer data. Because of this, if the stored transaction information for a particular merchant is compromised, the CVV numbers are not included. If the fraudsters then attempt to use the stolen card information, as long as the card-not-present merchant requests a card security code, they will be unsuccessful.
How Do They Affect Chargebacks?
Card security codes help protect merchants from chargebacks, particularly in the card-not-present environment. They are only helpful to CNP merchants, however, if they are enforced.
If a customer must have the physical card to have access to the card security code, then it is more likely the cardholder themselves. The less chance of a fraudulent transaction means the less chance for chargebacks.
Card-not-present merchants are greatly encouraged to require card security codes at checkout. If the customer does not know this code or does not have access to it, there is a high chance that they are not the cardholder. If required, processing a transaction with an incorrect security code could result in authorization errors and even Visa chargeback reason code 71, for processing a transaction with a declined authorization.
By requiring the card security codes, merchants are not only protecting their customers from credit card fraud, but they are also protecting themselves from chargebacks.
But Are They Fool-Proof?
While card security codes are often helpful in protecting merchants from chargebacks, they are certainly not infallible.
Card verification values aid in clearing out criminal fraud chargebacks, but they are no match for friendly fraudsters. If a cardholder makes a purchase using his or her own payment card, and then requests a chargeback in order to receive the purchase for free, a card security code has not protected the merchant. The same goes for a cardholder who files a chargeback on a purchase made by a family member or friend who was using the card. This abuse of the chargeback process is much harder to prevent.
In addition, if the card itself is lost or stolen, then the card security code is then helping the fraudster in the same way it is meant to help the cardholder. If the fraudster is in possession of the card, the number is printed right in front of them.
If you are a merchant and you are experiencing friendly fraud chargebacks that can’t be solved simply by card security measures, we may be able to help! By contacting DisputeChargebacks today, we are able to discuss new prevention techniques to help you combat chargebacks and fight friendly fraud!