Verified by Visa - vilified but still alive and kicking

Den Howlett Profile picture for user gonzodaddy July 2, 2014
Visa's brand may be as strong as ever but Verified by Visa is proving to be a significant choke point. Most seem to think they don't care. So what of alternatives?

via verified by visa
In a recent interview on Wired, Pat Phelan, Trustev CEO said:

A critical driver of the shopping cart abandonment issue is, in Phelan's opinion, Verified by Visa -- the second authentication process that appears after buying a product online in the UK. "We think it's a very bad experience. It leads to a very bad cart abandonment issue. Just run a Twitter search on Verified by Visa and you'll find out how much people like it."

I did just that and have been monitoring activity over the last few days. He's right. Almost all the posts there are negative with many pleading for the service to be axed. Here's a sample:

Why is this the case?

Verified by Visa is difficult to use. A few weeks ago I was on the phone to one provider explaining that it would not accept a postcode only to be told that when using a UK postcode, it had to be eight characters in length. In my case that meant inserting two extra characters. Others report blank screens, still others report an inability to change passwords - the list goes on.

A recent addition has been the inclusion of the Mastercard SecureCode logo as part of the verified screens you're likely to see. These are supposed to provide an extra level of protection only this time for the merchant who would otherwise be on the hook for fraudulent transactions.

What is the impact?

SeeWhy, set out to learn if this logo use was a deterrent to others as well. In a survey of 502 U.S. online shoppers to determine consumer attitudes to these programs, SeeWhy asked them whether they would consider abandoning when presented with one of these logos.

The findings revealed that 12 percent consider abandoning when they see either the Verified by Visa or the American Express SafeKey logos, while 10 percent will consider abandoning when the see the MasterCard Secure card logo.

It may not sound like much if 10-to-12 percent abandon upon seeing one of these logos. But remember that these logos are being shown on the cart summary page or at the start of the checkout. Therefore, the potential impact is much greater because there is significantly more traffic at this stage compared with the end of the checkout process, when the pop-up is presented. If PayPal is being offered as an alternative this may cause more customers to use PayPal, incurring potentially higher levels of fees for the merchant.

I have abandoned many transactions based upon the dreaded Verified by Visa screen and if the Tweetstream is anything to go by, then so do a steady number of others. How many will require more than a single study.

As a consumer, I want a seamless and smooth buying experience. As a merchant, the last thing I want is abandonment but on the other hand, it seems in part that Visa/Mastercard have handed PayPal a business even when the merchant fees may be higher. That's plain wrong.

Many merchants, and especially the low cost airlines, overcome the cost issue by adding charges to your bill based upon whether you are using debit/credit cards or PayPal. In short, merchants are double banking by insisting upon Verified by Visa and/or using PayPal but not wishing to bear the cost. Either way, the consumer loses. And while those transaction costs, frequently in the $7-10 range may not seem a great deal, they quickly add up if you are a frequent user of merchant services.

We already know the financial institutions are concerned about the rise of alternative payment systems like BitCoin. The Verified by Visa situation has opened the door for companies like Trustev to step in with a more modern approach.

The few conversations I've had with Phelan suggest that the market is wide open for new approaches. He has hinted at the kinds of company who are actively piloting Trustev and they include the usual suspects - telco, airlines and the like. Just getting a handful of these on board represent massive wins for startups and yet I don't see the large players doing anything to prevent their incursion.

Like so many things, it is likely a case of the startups being perceived as little more than a mild annoyance in a very large market, That changes if merchants have confidence that abandonment rates are significant and are prepared to switch. Whether the abandonment number is one, five or ten percent doesn't matter. It's still lost business. No-one wants that in a fast moving and competitive environment. If the startups can get traction with very large merchants such as one or more of the airlines, then the landscape will change very quickly.

In the meantime, Phelan is running around as many startup competitions as he can, getting as much media coverage as possible in the expectation that the larger merchants will take notice of his company's continuing string of successes and prizes. Don't be surprised if Trustev does well.

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