Four Factors Influencing Fraud Right Now


Spring 2020 has been the definition of disruption. Travel is out. Live events are out. Working from home is trending. Across every region and industry e-commerce  in…big time.

It’s well worth highlighting that for every statistic and trend showing an increase in digital revenue or transactions, there’s an automatic implication that consumers are logging in and checking out with an email address. Using that data as a core indicator for transaction risk is scalable and highly predictive at a moment when businesses need to respond to volume and changing fraud tactics.

Read on for our summary of the factors influencing fraud management now.

Card Not Present + No Contact Delivery = Golden Fraud Opportunity

Pyments highlighted the realities of the Card Not Present world:

Good News: People and businesses are getting better at detecting and preventing fraud for online transactions.

Bad News: ID theft is behind 80% of all banking industry credit card losses.

Key Takeaways: “‘Institutions should not just rely on one piece of data to validate the identity of a person when opening accounts,’ said Pangretic, adding that it is imperative for banks to gather credible identity information from multiple points and then train employees to identify red flags while following KYC guidelines.”

  • Embrace partnerships and outsource some risk management functions
  • Educate consumers about technologies and tools used to deter fraud
  • Proactive communications strategies are effective in preventing fraud attempts

Bottomline: When almost all transactions are CNP, fraud leaders will need to implement a multi-layered strategy when it comes to identity. As digital engagement increases, on-going communication and consumer education will play a fundamental role in fraud prevention strategies.

Customer Experience Investments Are a Good Bet observes the impact of digital commerce acceleration. 

Stat to know: Digital revenues spiked 41% in the last 15 days of the first quarter.

Trend Spotting: Mobile is dominating. In Q1 mobile ecommerce traffic increased grea 25% across all industries.

Key Takeaways:Picture six months from now, shopping for a new car, clothes, jewelry, furniture, electronics, or whatever it is you choose to shop for in person…It’s hard to imagine that reasonable consumers wouldn’t practice risk-averse behaviors for the foreseeable future. This means ecommerce and the digital customer journey are going to continue to skyrocket.”

  • Retailers must invest in digital beyond bolting on new platforms/channels. It’s an opportunity to deliver new value through native and intuitive experiences.
  • AI-driven product recommendations had a 26% impact on lift in average order value.
  • Some companies are said to be experiencing “Black Friday” level traffic as digital becomes the only means for consumers to shop. 

Bottomline: Companies who were shocked into digital transformation or fast-tracked existing plans will succeed by investing in customer experiences. Coupling this effort with strong fraud deterrence that spans physical, digital and device identities will make these investments even more successful for the long term.

We Are What We Repeatedly Do. And That’s Changing.

Harvard Business Review observes the core drivers behind behavior changes that are expected to persist beyond the current crisis: Work from home, increase in single-person households and an aversion to density.

Key Takeaways:If work from home dramatically increases, household sizes continue to decrease, and people continue to fear density, there is no going back to the old strategies that drove profits and growth.”

  • A survey of CFOs noted that they planned to shift 20% of their employees to remote work to save costs.
  • Airline industry profits rose as they increased their load factor from 75% in 2005 to 85% in recent years, but that strategy has gone out the window.
  • The fundamental value proposition of co-working spaces — working side-by-side next to strangers — has become wholly undesirable overnight.

Bottomline: As human habits shift, fraud tactics will evolve. Understanding the behavior changes can inform fraud prevention strategies so organizations can be responsive with their risk management programs.

Models Matter

PaymentsJournal addresses one of the challenges at the intersection of ecommerce and financial institutions during the global pandemic – fraud models.

Key Takeaways: There are two things that these businesses must always do when combating fraud: firstly, they must be able to distinguish between what is genuine and what is not in order to prevent false positives and the rejection of genuine customers; the second is that they mustn’t increase negative friction during the payment process and ultimately lose conversions.”

  • Assess fraud on the front end of a transaction, with models that identify patterns like past purchases from the same device.
  • Robust machine learning models can help businesses keep friction low for quality customers, and simultaneously deter risky transactions.
  • Fraud models must learn and scale to be effective in this environment. 

Bottomline: Fraud models are not one-size-fits-all. Custom models for region, industry and individual business are necessary to respond to the rapid evolution in tactics. Solutions that learn and have data inputs from a global data consortium will become increasingly valuable as organizations work to support digital business by deterring fraud and delivering experiences that meet shifting customer expectations.

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