By George Ralchev, Head of Risk Management at emerchantpay
Online safety concerns may have reached an all-time high between 2020 and 2021, but that doesn’t mean that merchants need to panic. Ahead of Christmas and the Q4 gifting season – the “golden quarter of retail” – merchants can still secure a position on the “safe” list with the right techniques in tow.
According to a survey of over 2,000 consumers by emerchantpay, 46% of consumers are indeed more fearful of fraud risk than before the pandemic. However, with 47% saying they would only shop from trusted businesses and a potential £74.6bn online retail revenue opportunity at stake, this increased awareness around security risks can be used as an opportunity to build trust and win customers.
A calculation from Juniper Research predicts $206bn in total fraud-based losses over the next five years, so retailers should be ready to adopt the right tools to protect themselves, their customers and their earned reputation as a trustworthy vendor.
Face fraud head-on
Point of transaction scams are among the most feared by consumers, but according to UK Finance, the majority are cases of impersonation scams, which happen when criminals mimic trusted organisations and trick individuals into paying for goods that will never arrive. In 2020 authorised payments relating to impersonations scams cost the public £479m, and nearly doubled the number of instances in 2019.
Similarly, hackers and scammers are mostly believed to target individuals to steal their bank account details, social security numbers and other personal information. In reality, cyber criminals more frequently benefit from access to databases which contain credit or debit card information from a large pool of victims.
Bearing in mind the tell-tale signs, merchants should maintain a user-friendly online experience which reassures users of authenticity. By monitoring the fraud landscape, they can build knowledge around identification software, data protection tools and approved payments providers to partner with. Putting appropriate strategies in place means that merchants can ensure security in an increasingly digital environment.
Adopt unified communications
Retailers are now challenged with straddling physical store interactions and online experiences, including payments processes. Touchpoints spread across online and in-store channels add layers of complexity to the customer relationship, making it difficult to track each transaction.
A unified commerce strategy with integrated fraud detection solutions can help by collating individual consumer behaviour patterns and all historical transaction data in real time. This helps to optimise the overall payments process and retailers can also combat fraud more efficiently by accessing a single view of each customer.
Trustworthy payment service providers will enhance a unified commerce strategy by leveraging a global anti-fraud network. Through these partnerships, retailers can access secure databases which offer extensive transaction data and protection via advanced fraud solutions and authentication techniques. Removing friction from the shopping journey as well as protecting the consumer, unified commerce offers an opportunity to build on existing buyer confidence.
Take advantage of innovations
Payments fraud prevention tools have been developed, and online retailers should consider the best available strategies to protect their valued customers. But before they are implemented, retailers should have a good understanding of why they work and how they can be used most effectively.
- Payer Authentication (3D Secure)
Cardholder authentication measures allow cardholders to authenticate their card payments under various authentication features like dynamic passwords, token phone apps etc. The 3D Secure authentication (also known as Verified by Visa and Mastercard SecureCode) has an additional advantage for the merchants, as it offers chargeback protection against fraud-related disputes.
In the beginning of 2021, the new 3DS2 protocol became mandatory for all EEA one-off payments, which increased the security of the card payments to a new level.
- Risk Scoring
Risk scoring tools calculate the probability of transaction fraud in real time and are used to identify fraudulent transactions. Based on a number of statistical models and set of rules, risk tools indicate the probability of a fraudulent transaction. In such cases, the merchant should make an additional effort to verify the order connected with the payment in question and to either decline/refund the payment, if suspicion occurs.
- Real-time rule-based fraud prevention techniques
These are sophisticated fraud prevention systems based on recognisable fraud patterns, geo-location, count parameters, negative data or other defined rules. They improve filtering processes to prevent fraudulent transaction attempts and reduce costs down the line. In the long run, having real-time rule-based fraud prevention systems in place could help merchants save on costs related to disputes over losses and fees, deterioration of merchant’s reputation and trust, or potential assessments for negligence in relation to fraud prevention in case of high fraud activity.
The digital economy comes with enormous benefits, namely convenience, flexibility and access, but unless merchants are prepared to integrate the necessary fraud and risk management tools, these same benefits could be exploited by fraudsters, therefore elevating risk. Consumers tend to remain loyal to brands that prioritise their needs, moving away from those that don’t. Security and fraud should therefore be high on the list of priorities, as some of the most basic, but fundamental, needs.
Fraudster tactics don’t stay the same for long though, so consistent evaluation and re-evaluation of fraud protection tools will be the next commitment to make. For many shoppers, the overall payments journey offers proof that due diligence around data security had been done. To allay any fears, online retailers should therefore pay close attention to keeping browsing and payment experiences slick, transparent and fool-proof.