Dynamic CVV Verification: Helpful Tool or Too Much Trouble?

Credit card technology has come a long way from the olden days when the merchant would slide a customer’s card through an imprint machine and then hand the customer a carbon copy of the receipt. From the introduction of the magnetic stripe and more recently the EMV (or “chip”) card, each evolution has made credit card purchases safer and easier.

The latest credit card variation is dynamic CVV cards. While proponents claim dynamic CVVs are far more secure than even EMV cards, it’s not clear whether this new credit card technology lives up to the hype.

Whereas “static” card verification value (CVV) has been a mainstay of fraud prevention for years, in which a three or four digit CVV number is imprinted onto the card, dynamic CVV cards feature a randomly generated set of CVV numbers that change automatically after a predetermined amount of time. The intention is that stolen credentials become obsolete within a very short amount of time, making the cards difficult (if not impossible) for fraudsters to compromise.

Notably, Bank of America and Société Générale, among other issuers, are hopeful about the technology and are actively beta testing this new card feature. However, dynamic CVV may not be the perfect solution. Here’s what merchants need to know about this emerging technology.

The Advantages of Dynamic CVV Cards

Dynamic CVV technology can improve e-commerce in several ways.

Reduce CNP Fraud

Because the CVV code changes so quickly, by the time a cybercriminal tries to make an online purchase with a dynamic CVV card, the CVV code will already have changed and the fraudulent purchase will be declined.

Julien Claudon, head of card and digital services at Société Générale, reports that CNP fraud among his customers using digital CVV cards is almost zero.

No Extra Work for Merchants

Merchants won’t need to adopt any new processes in order to accept payment via dynamic CVV cards, other than possibly educating their customers, particularly those who have memorized their CVVs.

Increased Revenue Opportunities

Dynamic CVV cards may improve the bottom line for credit card issuers. Although the cards themselves are expensive to issue, and there will be a cost to implement the cards among the issuer’s user base, the reduced cost of CNP fraud may more than cover these costs. Less fraud means less time, money and effort needed to process chargebacks.

The cards can also directly generate revenue. Société Générale, for instance, charges its customers a monthly subscription fee for the dynamic cards, further offsetting their cost. Add to that the boost to the card issuer’s image in the market: Société Générale saw a more than 5% increase in new customers after adopting the technology.

The Downsides to Dynamic CVV Cards

Even if dynamic CVV technology might reduce fraud, that doesn’t mean it will be cheap or easy to implement. Here’s what some experts say are the biggest sticking points to implementing dynamic CVV technology.

Dynamic CVV Cards Are Expensive

While a non-chip card costs around 39 cents and a chip card can run closer to $3, a credit card with dynamic CVV capabilities runs significantly higher — as much as $15. This means reissuing costs can span upwards of $40, including replacement cards and case analysis.

Fraudsters See Dynamic CVVs as a Challenge

Fraudsters consider it a personal challenge to find ways to compromise antifraud measures like the dynamic CVV card. So, while this approach may initially reduce fraud, cybercriminals are creative enough that they just might find a way to compromise this safety feature.

Friction Could Increase

This new technology could make it more difficult for customers to enter the correct CVV number into their online shopping cart before the number changes. This could increase false declines and create a new layer of friction which could cause more customers to abandon their carts.

Additionally, many customers have memorized all their credit card details — down to the CVV — so they can place online orders even if their card isn’t in front of them. With dynamic CVVs, customers would lose that convenience, and merchants might lose a sale.

Recurring Billing Will Become Problematic

Merchants (and customers) who rely on recurring billing will also experience problems with dynamic CVV cards. Merchants may have to reach out to customers to get updated billing information each time a transaction needs to process, which may increase frustration levels on both sides and lead to lost sales.

While several issuers are currently beta testing this technology, it’s still unclear what impact dynamic CVV cards will have on a merchant’s bottom line. Time will tell whether this is an extra layer of protection or an expensive, easily hackable payment option.

It’s important for e-commerce merchants be up to date on this and other technologies that will change the way they do business in 2020 and beyond. Curious about what other trends are on the horizon to help online retailers meet their customers’ growing needs for personalization, convenience and security? Download our white paper about E-Commerce Technology Trends and see how you can use these technologies to build your business in the year ahead. Then, if you have any questions about these trends or want to discuss your fraud management approach, simply contact one of our experts!

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