Security Throughout The Transaction

Rapid online sales growth + the transition to EMV® microchip technology = more card-not-present (CNP) fraud. Much more CNP fraud.

A recent report by Juniper Research titled Online Payment Fraud: Emerging Threats, Segment Analysis & Market Forecasts 2018-2023 predicts that retailers around the world will lose $130 billion in digital CNP fraud between now and 2023 as complex cross-channel fraud becomes the “new normal.”  

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Security Throughout The Transaction

Apr 15, 2019

Security Throughout The Transaction

Rapid online sales growth + the transition to EMV® microchip technology = more card-not-present (CNP) fraud. Much more CNP fraud.

A recent report by Juniper Research titled Online Payment Fraud: Emerging Threats, Segment Analysis & Market Forecasts 2018-2023 predicts that retailers around the world will lose $130 billion in digital CNP fraud between now and 2023 as complex cross-channel fraud becomes the “new normal.”

The report’s authors note that merchants have tended to focus their anti-fraud efforts at the point of transaction, a woefully inadequate response, especially in light of the fact that there are more comprehensive tools available that can both prevent fraud and increase valid order acceptance.

In a press release issued in the wake of the report’s release, author Steffen Sorrell emphasized that merchants should employ a layered fraud detection & prevention (FDP) solution, which not only “helps [with] directly preventing fraud, but also offers major gains in terms of recovering potentially lost revenue through false positives. This is something about which retailers remain uneducated, and has allowed fraudsters to capitalize on relatively low FDP spend.”*

Sorrell’s recommendation is on point, as is his assessment of merchants being largely unaware that better security is possible—that is, security that works throughout the transaction and payment process.

Ways CNP Fraud Affects Merchants

Before specifically addressing the possibilities in regards to security, it’s worth taking a step back and highlighting many of the different ways that CNP fraud affects merchants. These include:

  • Fees associated with chargebacks
  • Lost merchandise
  • A high volume of manually-reviewed orders, which leads to increased labor costs

In worst-case scenarios, merchants can even incur fines and lose their merchant accounts.

Yet a less obvious way that merchants lose business is when their limited FDP solution declines a “good” order. These false positives not only result in lost sales and lost revenue, but insult legitimate customers who go on to take their business elsewhere.

Of course, one of the greatest challenges facing merchants is to enable better security without negatively impacting the consumer’s experience, as user experience has historically been at odds with fraud controls. But thanks to innovation—including advancements in artificial intelligence (AI) and machine learning technology—it’s now possible to deploy a multi-layered FDP solution that can both reduce chargebacks and costs while simultaneously increasing valid order acceptance, thereby boosting sales.

Payments Fraud Prevention Using Kount®

Consider, for example, Kount’s payment fraud prevention solution, which screens multiple dimensions of every transaction (geolocation, device, email, etc.) and uses proprietary AI and machine learning tools to create a cumulative “picture” of each transaction in real time. Critically, Kount’s solution has both a “supervised” and “unsupervised” component, which allows for improved performance through learning.

The so-called unsupervised side of the technology—referred to as Persona™ technology—extracts persona signals from the data and uncovers hidden links to “bad actors” via indirect association, making it capable of exposing fraud as it emerges. The supervised side of the technology—called Boost™ technology—allows for continuous evaluation of AI results by human fraud experts, which ensures that machine learning algorithms are continuously optimized.

In other words, unlike other much-less-sophisticated FDP solutions, Kount doesn’t over-rely on machine learning or hard-and-fast rules; instead it takes a balanced approach that includes examining millions of data points but also allows for humans to contribute fraud expertise and best practices. Better yet, the technology doesn’t detract at all from the consumer’s experience. In less than half-a-second, a decision is rendered: The transaction is either approved or declined, or subject to manual review or escalation.

Meanwhile, another enormous benefit is the predictive power of accumulated data and experience, which allows your business to obtain the optimal balance between revenue and fraud reduction by approving or declining specific risk scores or taking into account changing conditions or threat levels. For example, you might want to set a higher threshold for approval in the period between Cyber Monday and New Year’s, when fraudsters are especially active, hoping to take advantage of overwhelmed and distracted merchants.

The Future of Transaction Security

If you have any doubt that using tools like the one described above won’t soon become mission critical, remember that keeping transactions secure is only going to get tougher as technology enables new ways to make payments and there are more devices from which payments are initiated. Anyway, the chance to tailor your FDP approach to your specific areas of concern and the types of fraud you most commonly experience—never mind the ability to tweak your approach based on results—should be enough for you to further investigate the possibilities.

Questions? TSYS Can Help

Of course, if you have any questions about the options you have for taking payments—and the best emerging payment technologies for your customer demographic—don’t hesitate to give us a call at 1.888.845.9457. We also offer analytics solutions that allows you to review valuable data associated with your sales and payment transactions, data that can help you better understand your customers and their purchase patterns.

*Juniper Research: Retailers to Lose $130bn Globally in Card-not-Present Fraud Over the Next 5 Years, Business Wire, https://www.businesswire.com/news/home/20190102005011/en/Juniper-Research-Retailers-Lose-130bn-Globally-Card-not-Present/?feedref=JjAwJuNHiystnCoBq_hl-fLcmYSZsqlD_XPbplM8Ta6D8R-QU5o2AvY8bhI9uvWSD8DYIYv4TIC1g1u0AKcacnnViVjtb72bOP4-4nHK5iej_DoWrIhfD31cAxcB60aE

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