Nowadays, heightened geo-political tensions and technological advancements collide, escalating ecommerce risk. Online marketplaces thrive on trust – however, the rise of digital transactions also results in increased fraudulent activity. Sophisticated attackers exploit the payments landscape, making data security and fraud prevention critical. According to Rapyd’s 2024 State of Payments: High Opportunity Industries, 42% of businesses rank fraud as a primary risk, up from 31% in 2022. This trend is expected to grow substantially with adversarial usages of artificial intelligence (AI), such as synthetic voice or audio content (‘deepfake’) aimed at gaining access to financial services or exploiting security vulnerabilities. That’s why online marketplaces need to understand and address these five key security challenges.
Source: Rapyd’s 2024 State of Cross-Border Payments Study
In today’s globalised marketplace, securing online transactions and safeguarding customers’ sensitive personal and financial information are top priorities for businesses. This is why partnering with a reliable payment provider that prioritises security is essential. However, a one-size-fits-all approach won’t suffice. Effective fraud prevention requires monitoring programmes that are customised to specific business needs and regulatory requirements, as financial activity monitoring is not uniform, and different businesses and regions have varying risk profiles. Thus, robust providers offer programmes that adapt to unique circumstances, ensuring real-time identification and risk mitigation. Building trust and fostering collaboration are key to tackling fraud effectively – which can be ensured by partnering with providers that offer real-time reporting and clear insights into how they handle suspicious activity. Responsive customer support and a proactive approach to collaboration are vital for resolving issues, optimising payment processes, and ultimately fortifying transactions.
Operating across borders comes with a complex web of international regulations that online marketplaces must comply with. Organisations like the Financial Action Task Force (FATF) set global standards to combat money laundering and terrorist financing – and non-compliance with these regulations can lead to hefty fines, reputation damage, and loss of customer trust. Sophisticated payment providers can simplify the process with robust monitoring systems for identifying transactions originating from or involving entities in high-risk jurisdictions as designated by the FATF. Proactive measures such as stringent due diligence processes and enhanced transaction monitoring are essential for safeguarding operations from regulatory scrutiny.
Safeguarding consumer information is paramount for online marketplaces. Regulations like the General Data Protection Regulation (GDPR) mandate data collection and usage transparency, prompting marketplaces to be clear about the data they collect, how it’s used, and with whom it’s shared. Consumers and regulators increasingly demand transparency and accountability regarding data handling practices. Transparency fosters a sense of security and encourages informed decision-making by users, whilst strong data protection safeguards consumer information and builds a loyal customer base for the marketplace.
According to Rapyd’s State of Cross-Border Payments Study, AI is the number one fintech innovation merchants expect to see grow in 2024. It has the potential to improve online marketplaces by customising user interactions with personalised suggestions, refining search capabilities for better outcomes, and providing immediate assistance through automated chatbot customer services. Advancements in AI also offer unprecedented opportunities for fraud detection and risk mitigation, as AI-driven solutions can identify and monitor risks in real time, offering greater efficiency than the one achieved with traditional methods.
However, the regulatory ambiguity surrounding AI complicates the implementation efforts. Online marketplaces need to work with a payment provider dedicated to navigating regulatory frameworks and able to develop innovative and sophisticated solutions. Finally, marketplaces and their technology partners must be cautious in mitigating potential biases that could impact decision-making processes – particularly in areas like credit scoring and risk assessment. Understanding why an AI flags fraud is crucial, and marketplaces need AI models that clearly justify their decisions.
Clear communication and transparency about security practices are crucial for online marketplaces. Educating sellers and consumers about online risks and best practices allows them to make informed decisions and participate actively in a safe online environment. A collaborative approach, where marketplaces educate sellers and consumers, who, in turn, safeguard their actions online, strengthens the overall security posture of the marketplace ecosystem. Additionally, marketplaces can leverage data insights to enhance security further. Marketplaces can identify potential vulnerabilities and implement targeted security measures by understanding user behaviour and purchasing patterns – a data-driven approach which creates a dynamic defence system that adapts to evolving threats and user behaviour.
Overcoming fraud, regulations, and data protection challenges is essential for secure payment transactions. Collaboration with a reliable payment provider, continuous adaptation to evolving security threats, adoption of advanced technologies, and seller and consumer education are key ingredients for success. By prioritising these aspects, marketplaces can navigate the complexities of the digital landscape and create a thriving online environment for buyers and sellers alike.
This editorial piece was first published in The Paypers' Fintech for Marketplaces and Platforms Report 2024 which taps into the fast, ever-expanding ecommerce industry, being the ultimate source of information for businesses looking to expand and grow their consumer base.
Dr Shlomit Wagman, Chief Regulation and Compliance Officer at Rapyd, is a global expert in financial regulation and compliance. Previously, Dr Wagman served as the Director-General of the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA) and played a key role in regulating cryptocurrencies and leading Israel's accession to the Financial Action Task Force (FATF). She further Chaired the Operational working group at FATF.
About Rapyd
Rapyd is a global fintech company that provides businesses with the tools to build payment and financial experiences anywhere in the world. Their platform enables companies of all sizes to transact internationally, pay and get paid locally, and simplify complex financial operations. With a global network and advanced technology, Rapyd makes cross-border commerce frictionless.
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