Payment authentication refers to the process of confirming that a cardholder’s card number or other personal data is not being used to make payments without their knowledge. Merchants, banks and card issuers, and payment processors typically use a combination of authentication factors. The common ones include something a person knows (like login information or secret question answers), something a person has (like a mobile phone or computer), and something a person is (such as using biometric technology like fingerprint scanning)
So, why is payment authentication important? When it comes to online and mobile commerce, the need for transaction authentication has never been greater. In the year 2020, global spending on e-commerce reached $4.2 trillion, a growth of almost 28 percent. However, losses from illegal purchases using stolen credit card numbers are growing nearly as fast.
Merchants, banks and card issuers, and payment processors use forms of authentication to protect themselves from fraudulent transactions and chargebacks. If you have ever had the chance to shop on the web or through mobile apps, for example, you have likely encountered some form of payment authentication. Challenge questions, one-time passcodes, fingerprint biometrics are a few common methods that are used to confirm your identity and confirm that payments made from your credit card or other accounts are legitimate.
However, behind the scenes, merchants, card issuers, and financial institutions have a series of authentication protocols beyond simple security questions.
One of the few authentication methods that are commonly used is Card VerificationValue (CVV). This method has become a standard method of authentication for ecommerce transactions. Nowadays, most card-not-present (CNP) transactions that are made using a credit card number require the customer to enter the CVV, which is a 3- to 4-digit code that is listed on the front or back of the physical card, by default.
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