Visa expands Asian online verification to Japan

Visa International Asia-Pacific Ltd. has expanded its Verified by Visa program, which is intended to cut down on fraud associated with online shopping, to Japan and announced seven major credit card issuers have jumped on board the system.

Verified by Visa came to Asia in March this year, when the system was launched in Singapore and United Overseas Bank became the first card issuer to announce support for the scheme. In Japan, the system will be rolled out by Sumitomo Mitsui Card Co. Ltd., Nippon Shinpan Co. Ltd., Daiei OMC Ltd., Credit Saison Co. Ltd., DC Card Co. Ltd., UFJ Card Co. Ltd. and UC Card Co. Ltd., all of which are major national credit card issuers.

Together, the seven card issuers have a goal of issuing 1 million passwords and bringing on board 1,000 merchants in Japan in the current fiscal year, which ends on March 31, 2003.

Launched first in the U.S. in late 2001, cardholders of Verified by Visa member banks and card issuers are able to register and gain an additional password for use in online shopping. The password is used when making a credit card purchase online through a supporting retailer and helps to ensure the identity of the card holder.

The system was introduced to cut down on the number of disputed transactions associated with online shopping. A study by Visa showed that online retailers are likely to suffer three times as many disputed transactions as traditional retailers, even after factors such as incorrect goods or late delivery have been excluded.

Among the areas where such disputes are most common are gambling and adult Web sites. Typically, consumers try to claim they never made transactions in instances such as when they lost money gambling or when the wives of users discover charges to adult sites on their credit card bills and the husband denies any knowledge of the subscription.

With the new system, it becomes much more difficult for a cardholder to claim they were not the person who initiated the transaction because the password should be known only to them.

At present when such disputes happen, the card issuer and merchant must exchange documents and decide whether the transaction was fraudulent or not, a process that costs around US$20 for each dispute, said Visa Asia-Pacific spokesman Daniel Lintz. All of this means online merchants are charged significantly higher rates for handling credit cards -- around 10 percent against the 2 percent commonly charged to major offline retailers -- and those charges are often passed on to consumers.

With the Japan launch, the system will be operating in six countries in the region: Singapore, Japan, South Korea, Australia, New Zealand and India. Forty banks and card issuers have announced support for the system, said Lintz.

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