The Australian Competition and Consumer Commission (ACCC) has issued a draft determination rejecting an application from the Australian Payments Clearing Association (APCA) that would mandate the use of 3D Secure by online retailers.
3D Secure is Visa-developed security process designed to prevent fraudulent online credit card transactions. It is based on analysing a card holder’s spending habits and if an anomaly is detected it requires an additional form of authentication such as a code sent via SMS message.
The APCA represents the payments industry and its members include banks, major retailers and payments service providers.
In its application the group said that only about 3000 of an estimated 100,000 online merchants operating in Australia were employing 3D Secure.
In its draft determination the ACCC said it “supports the broad aim of the proposed conduct to reduce card not present fraud”.
However, the ACCC said that the APCA “has not justified why Australia should mandate a particular security product, which appears to be out-of-step with the approach taken in overseas jurisdictions”.
“In Europe, India and Singapore, for example, where security measures have been mandated, a product neutral approach has been taken. APCA has not justified why a different approach is appropriate in Australia,” the draft determination states.
“Currently, there are a range of anti-fraud products available for merchants to choose from. The mandatory roll out of 3D Secure to Australian payment cards and online merchants is likely to reduce this competition and would impose significant costs on a large number of online Australian businesses,” ACCC chairperson Rod Sims said.
“The ACCC does not accept that it is necessary to mandate a particular anti-fraud product,” Sims said.
“The cost of online fraud is principally borne by the online business that accepts a fraudulent transaction. Accordingly, each business can be expected to take the cost of fraud into account in making decisions about whether to invest in anti-fraud measures, and to engage anti-fraud technologies that are worthwhile for that business’ particular needs and circumstances.”
The APCA said that it estimated the direct cost of a mandated rollout of 3D Secure would be in the region of $393 million.
The ACCC is accepting submissions on its draft determination until 10 June.
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