NBAD tackles authentication with Visa

National Bank of Abu Dhabi has signed up to Visa International’s e-commerce transaction authentication system, Verified by Visa. Both Visa and NBAD hope the programme will boost e-commerce adoption in the region.

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By  Matthew Southwell Published  July 30, 2002

|~||~||~|National Bank of Abu Dhabi (NBAD) has become the first bank in the Middle East to sign up to Visa International’s e-commerce transaction authentication system, Verified by Visa. Both Visa and NBAD hope the programme, which validates both the cardholder and merchant’s identities before processing a transaction, will boost e-commerce adoption in the region and reduce the number of fraudulent and disputed transactions.

“Verified by Visa is in everyone’s best interests. Consumers are able to take measures to protect their Visa accounts from unauthorised use [and] NBAD is able to authenticate a cardholder during an online transaction, thereby protecting merchants from consumer disputes. This safeguards their transactions and provides a level of security and peace of mind that was not previously possible,” says Steven Haycock, head of retail banking at NBAD.

According to Stuart Brocklehurst, senior vice president & head of digital commerce, Visa International, there is a huge demand for a solution such as Verified by Visa from merchants. “Many merchants don’t go online because of the lack of a payment guarantee. As a result, they are gagging for Verified by Visa. The issue is not persuading them to join, but getting them to form orderly queue,” he says.

There is also a demand from consumers, according to Visa, because many users remain reluctant to use credit cards online due to security concerns. The credit card giant points to research conducted in the US and Asia/Pacific that revealed that more than 70% of consumers cite security concerns as the primary reason for not shopping online.

“Whether we like it or not there is a perceived security risk when it comes to using credit cards on the Internet. Verified by Visa really takes away this risk,” comments Peter Scriven, general manager, Visa Middle East.

“By bringing authentication to the Middle East, we are moving e-commerce onto a sound footing, which will enable it to realise its full potential. There are other gaps [in its development] and other people will fill those, but hopefully we have played our part,” adds Brocklehurst.

NBAD began trailing the programme at the beginning of July with two Abu Dhabi-based merchants — Abu Dhabi Duty Free and Thuraya. It plans to roll the solution out to more merchants by the end of the year and persuade approximately 20,000 of its cardholders to sign up to the service.

Although NBAD is the only bank in the region currently using Verified by Visa, the credit card giant expects uptake by other financial institutions to be rapid.

Brocklehurst predicts that all of the Gulf’s acquiring banks — those that process transactions on behalf of the merchant — will be signed up by April next year. One of the main reasons for this is that the liability for disputed transactions will shift from the acquiring bank to the issuing bank — those that issue the Visa card — from the beginning of April. “Many banks are going to sign up [to Verified by Visa] as protection when the liability shifts,” he explains.

Banks that implement Verified by Visa can either do so in house or, like NBAD, they can outsource it to Visa’s preferred partner, BT Ignite. Brocklehurst believes the majority of banks will choose to outsource, so that they can focus on their core business. “We expect many will use the outsourced option because BT Ignite has the expertise, the scale and the capacity,” he says.

To enable issuers to sign up for a managed issuer service without having to upgrade their existing systems, Visa is providing an issuer On-Behalf-Of (OBO) service that uses Arcot Systems’ TransFort Platform to deliver the functionality and helpdesk support required for the service. Locally, Comtrust will implement the Arcot software for the National Bank of Abu Dhabi’s e-merchants.

According to Visa, deploying the technology behind Verified by Visa is both quick and easy. “Using Visa’s off-the-shelf issuing and acquiring packages, NBAD has demonstrated the speed with which the service can be implemented. In fact, it took less than six weeks from the decision to go ahead until the trial programme began,” says Scriven.

Once up and running, merchants that sign up for the service only need to create a hyperlink from the payment point on their web site to their acquiring bank. Cardholders can sign up either through their bank or through a merchant’s web site.

The solution works by separating the authentication and authorisation aspects of an online transaction. The payment authentication takes place within Verified by Visa, which is hosted on the BT Ignite servers.

The actual transaction is completed on the acquiring bank’s systems, so the merchant is denied access to the actual credit card and instead relies on the approval message from Visa to guarantee the payment.

“Consumers are able to take measures to protect their Visa accounts from unauthorised use by selecting a personalised password that becomes their online ‘signature’ for web purchases. Only the issuing bank and the cardholder know the password, which means that the cardholder’s account details are secure from any other external parties,” explains NBAD’s Haycock.

Security is assured during the transaction by the use of 3-D Secure protocol, which has emerged out of the secure electronic transaction (SET) standard. The session itself is hosted through SSL on the BT Ignite site servers and a set of challenge and response data authenticates each individual cardholder. Merchants that register for Verified by Visa are also screened by their acquiring bank to boost security and to ensure that there are minimum service quality standards.

“With close monitoring of the practices of e-merchants, the buyer is now far better protected against ‘bogus’ merchants than before,” comments Haycock.

Although Visa is not the first company to establish some sort of ‘trusted’ payment application it believes it will be the first to succeed due to its sheer size.

“There have been a number of attempts to establish proprietary systems but they have not worked. Unlike these initiatives, Visa has the critical mass and a billion people could be shopping online using Verified by Visa,” says Brocklehurst.||**||

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