Why do some online payment processors require the CVV code and others don’t?
In: Technology
Online credit card processing can be done in many different ways according to many different options. Strictly speaking, to bill a card, all you need is the number. All the other information is optional.
Credit card processing companies are in charge of collecting credit card processing fees, authenticating the card, and billing the credit card company.
Whenever a company wants to take credit cards, they negotiate and sign a contract with one of these companies. If the account holder follows more security protocols to process cards, they get a discount. So most places ask for CVV to save money.
So a contract can be drawn up to not require CVV codes. But there may also be technological reasons preventing adopting new security protocols. For example, a lot of stores don’t use chip readers, because they don’t want to pay to replace their credit card machines. Online, a company might not want to upgrade their computer software to support CVV codes, because it costs money.
Above someone asked why a company would not want the most strict security options to reduce risk.
An important point is that the fraud risk is not the merchant’s problem. The credit card company loses money if the transaction is fraudulent. The merchant gets paid no matter what. So the processor basically insures every purchase against fraud by including that cost in the processing fee.
The question is whether a lower processing fee offsets the cost of increased security measures. When you do the math, sometimes less security saves money.
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