MasterCard is about to make your payment transactions much safer (MA)

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Payment companies are taking steps to make transactions more secure, and MasterCard is about to take a giant leap forward in this regard.

The company will launch its Identity Check app in the U.S., Canada, and the U.K. by the end of this year, according to ZDNet. The app drastically reduces one of the biggest hurdles to mobile payments by letting MasterCard users authorize purchases with fingerprints or photos rather than with strings of text (passwords, billing information, etc.)

And while the added convenience is sure to increase mobile payments transaction, the real benefit is in security. Some consumers had incorporated additional security measures such as 3D Secure, but these solutions only further complicated and lengthened the mobile buying process. Identity Check seamlessly integrates added security measures to improve the user experience.

The app will also benefit merchants because it will help prevent false declines, which cost retailers $118 billion in potential sales in 2015. Identity Check should also enhance security for online purchases, which is especially important given the fact that online fraud has been rising at an alarming rate since October.

And this problem has been prevalent for quite some time. Fraud cost U.S. retailers approximately $32 billion in 2014, up from $23 billion just one year earlier. To solve the card fraud problem across in-store, online, and mobile payments, payment companies and merchants are implementing new payment protocols that could finally help mitigate fraud.

John Heggestuen, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on payment security that looks at how the dynamics of fraud are shifting across in-store and online channels and explains the top new types of security that are gaining traction across each of these channels, including on Apple Pay.

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Here are some of the key takeaways from the report:

• EMV cards are being rolled out with an embedded microchip for added security. The microchip carries out real-time risk assessments on a person's card purchase activity based on the card user's profile. The chip also generates dynamic cryptograms when the card is inserted into a payment terminal. Because these cryptograms change with every purchase, it makes it difficult for fraudsters to make counterfeit cards that can be used for in-store transactions.
• To bolster security throughout the payments chain encryption of payments data is being widely implemented. Encryption degrades valuable data by using an algorithm to translate card numbers into new values. This makes it difficult for fraudsters to harvest the payments data for use in future transactions.
• Point-to-point encryption is the most tightly defined form of payments encryption. In this scheme, sensitive payment data is encrypted from the point of capture at the payments terminal all the way through to the gateway or acquirer. This makes it much more difficult for fraudsters to harvest usable data from transactions in stores and online.
• Tokenization increases the security of transactions made online and in stores. Tokenization schemes assign a random value to payment data, making it effectively impossible for hackers to access the sensitive data from the token itself. Tokens are often "multiuse," meaning merchants don't have to force consumers to re-enter their payment details. Apple Pay uses an emerging form of tokenization.
• 3D Secure is an imperfect answer to user authentication online. One difficulty in fighting online fraud is that it is hard to tell whether the person using card data is actually the cardholder. 3D Secure adds a level of user authentication by requiring the customer to enter a passcode or biometric data in addition to payment data to complete a transaction online. Merchants who implement 3D Secure risk higher shopping-cart abandonment.

In full, the report:

• Assesses the fraud cost to US retailers and how that fraud is expected to shift in coming years
• Provides 5 high-level explanations of the top payment security protocols
• Includes 7 infographics illustrating what the transaction flow looks like when each type of security is implemented.
• Analyzes the strengths and weakness of each payment security protocol and the reasons why particular protocols are being put in place at different types of merchants.

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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of payments security.