Visa’s Digital Authentication Framework (DAF) and Mastercard’s Token Authentication Framework (TAF) are set to transform the payments landscape, particularly in the area of fraud prevention.
Over recent years, standards like 3D Secure 2 (3DS2) and regulations like Strong Customer Authentication have curbed card-not-present (CNP) fraud, but with online transactions surging, more action is needed.
Global card fraud losses reached over $32 billion in 2021, projected to total $397 billion over the next decade, driven by increasing CNP losses. Beyond the financial and reputational impact, high false decline rates result in lost sales and damage customer relationships.
To address this, Visa and Mastercard are introducing authentication programs that shift responsibility from issuers to merchants, reducing friction for consumers and protecting all parties from financial losses.
Visa’s DAF, launched in April 2023, encourages issuer identification and verification (ID&V) and token-to-device binding across token types.
Under DAF, the issuer may only require authentication on the first use of the payment credential at the merchant, reducing subsequent friction. Liability remains with the issuer, encouraging fraud dispute protection and optimized approval rates.
Mastercard’s TAF, expected in 2024, aims to increase security and reduce friction by tokenizing payment credentials and authenticating cardholders. Merchants’ liability for fraud may vary by market.
TAF is based on three pillars: issuer authentication during ID&V, token authentication during transactions with multi-factor authentication, and securing transactions with a Digital Secure Remote Payments (DSRP) cryptogram.
DAF and TAF mark progress in enhancing the customer experience while ensuring security for merchants and customers. Payment companies and issuers with legacy systems can find it challenging to keep pace.
Solutions like Stanchion’s VERTO facilitate agile change and integration in evolving payment environments, ensuring efficient interactions with token service providers. VERTO modernizes core systems, enabling adaptation to changes like DAF and TAF.
