Here's an experience many of us have had: You're shopping on your smartphone. You go click on the shoes or books you want. But then, when you get to the shopping cart, you abandon ship. Visa says that's a big problem for retailers. On Wednesday, the credit card company announced it's rolling out a brand new system designed to get us to spend more money online.
One Password, Many Tokens
Visa is actually trying to fix two problems with one swipe.
First, shopping on your smartphone is great — until it gets tedious and you have to use your big thumbs to type lots of digits.
"All of the wonderful benefits that consumers get from using their mobile phone when you're out and about kind of fall apart when you get to the payment part of the process," says Jim McCarthy, Visa global head of product.
The new Visa Checkout should make it "really easy" for consumers, he says. Every Visa customer gets an account that stores their credit card number and billing address. And retailers connect with Visa to accept that account.
So when you're out and about in the digital mall, McCarthy says, "you'll just provide a username and password, and all that information will be provided securely on your behalf to the merchant for checkout." The first retailers to join the new system include Neiman Marcus and United Airlines.
Behind the scenes, there's a big security upgrade.
Visa, MasterCard and American Express all worked together on a new technology called tokenization. Under it, the 16 digits of your credit card stop running out in the wild, and stay inside the card company's server walls. The retailer just gets a randomly generated 16-digit token that can't be used anywhere else.
So if hackers break into, say, Target, the tokens they steal are no good at Amazon or Pizza Hut. "What we're trying to do is make the whole experience of someone trying to steal cards less profitable," McCarthy says.
Type Less, Spend More
Companies that sell products online — from the big box retailers to the mom-and-pop startups — have all been puzzling over how to get customers to not abandon the shopping cart.
Jamie Viggiano, head of marketing at TaskRabbit.com, says the new Visa Checkout could give a boost to online shopping. When you exchange cash or hand over a credit card, it feels like a financial transaction. A login and password don't.
"There's the psychological impact that I'm not forced with any payment guilt at least at the time of purchase," she says. "I think there's the potential that people would spend more."
What About Liability For Fraud?
Steven Murdoch, a cybersecurity expert at the University of Cambridge, is watching with some skepticism.
Visa says it's not changing its legal terms of service, just its technology. But according to Murdoch's research, when banks in Europe moved to improved security, it also became harder in practice for some customers to get their banks to listen to fraud claims.
"The rationale is that because the system is more secure, then any fraud that happens must be the customer's fault," Murdoch says. "But that is obviously not true, because it's just more secure. It's not perfectly secure."
Given Visa's massive size, Wednesday's move could set a brand new industry standard for online shopping. But, he says, not even Visa can eliminate all risk.
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