Could changing CVV codes be the answer to online credit card fraud?



Credit card transactions, particularly those that take place over the internet, have long been vulnerable to hacking by criminals and fraudsters. Today’s EMV chip cards have made strides in deterring fraud, but data breaches are still occurring at an alarming frequency. In order to make online payment processing safer for consumers and merchants alike, dynamic CVV codes are now being tested.

About security codes.

The security code on the back of most credit cards works in tandem with the embossed number, PIN or password to verify that the consumer is in possession of the physical card. When a customer pays via a merchant’s point-of-sale system, the scanner checks the CVV code in the card’s magnetic stripe. For payments that are made online or over the phone, a customer can simply key in or verbally provide the merchant with the CVV number. However, the advent of contactless NFC payments has brought about the need for dynamic CVVs since the card never leaves the consumer’s possession. With the new CVV technology, Visa, Discover, and Mastercard build codes right into their cards that work by attaching an algorithm that generates a new code after every transaction.

Not a perfect solution.

Dynamic CVVs are very effective for contactless NFC payments, when the customer taps their card near the merchant’s reader. However, standard point-of-sale payments are still at risk from fraudsters. This is because once the thief has access to either the physical card or the card numbers on it via theft or skimming, there are numerous ways the information can be exploited.

Promising innovations.

In recent months, a company called Idemia has begun to test the effectiveness of dynamic CVV codes that are displayed on credit cards via e-ink. They change after each transaction thanks to an algorithm supplied by Visa. If this pilot project proves to be successful, it stands a good chance of helping to lower the rates of internet fraud and data breaches that have made many customers wary of paying for goods and services online. Although the new dynamic cards are expected to cost an estimated $15 a piece to produce as compared to $2 to $4 for a standard EMV card, the technology may turn out to be an economic win-win in spite of this fact.

Shopping via the internet continues to be a popular way for people to quickly and conveniently get the items and services they want. This means of purchasing will only make stronger gains if the card-not-present payment process were to become more secure and stable. Fortunately, dynamic CVV technology has a great deal of potential to remedy this situation.