Adapting to change certainly isn’t anything new for ecommerce businesses, but change is happening faster than ever before as customer and fraudster behaviour evolves, new regulations become effective, and other external factors come into play. The challenge for ecommerce businesses is to keep pace and adapt their fraud strategies accordingly. Of course, they need to keep fraud and the associated chargebacks under control. But the other side of the fraud management coin is about accepting as many good orders as possible to keep customers happy and loyal, and bring in more business.
Machine learning is powerful. Adding human insight makes it more powerful
We’ve seen that merchants whose fraud screening solutions rely solely on machine learning (ML) can soon fall behind during turbulent times. Although ML is a powerful technology, it works based on historical data. Thus, it’s only as good as the data it consumes and the human-set rules it works to. It may be slow to pick up on radical changes in consumer and fraudster behaviour, which can leave a merchant experiencing:
high rates of fraud and chargebacks; or
low levels of customer satisfaction as too many good orders are rejected.
On the other hand, merchants whose fraud screening tool is backed by experts able to help with fraud strategy are often faster to adapt. They can take advantage of human intervention to analyse new trends and adjust fraud screening rules accordingly.
During the pandemic, for example, airlines had to act quickly to ensure they could accept one-way bookings for repatriation flights.
They had to change rules that would normally flag one-way bookings as potentially fraudulent transactions, so that people could buy tickets to fly home when lockdowns or quarantine restrictions came into force.
The other thing to bear in mind is that it’s unlikely that any individual merchant will have all the answers. That’s when gleaning intelligence from external sources comes into its own. Peers, merchant associations, and suppliers will all have insights to share about new trends and behaviours that can help individual merchants refine their own approaches.
Shift the focus: identify the good guys
One thing we’re seeing more and more is that fraud strategies really are becoming more sophisticated. Savvy merchants who are already doing a good job of keeping the bad guys out are now actively focusing on ways to get more business in.
To do that, they’re examining the customer experience and aiming to make it smoother and more enjoyable – for both new and returning customers. They’re also getting to know their customers better, understanding their habits and preferences, and adding personalisation to their shopping journey. To do that, your fraud strategy needs to be able to recognise genuine customers so that you can roll out the virtual red carpet for them. If you make it easy and convenient for them to buy from you, there’s every chance they’ll keep coming back.
Ultimately, you need to treat good customers with different rules in your fraud screening solution than those you use for suspicious-looking transactions.
There are plenty of elements you can use from your own and third-party data. Behavioural biometrics and device fingerprint are especially powerful sources of information.
The fraud manager’s role is changing
This shift in focus naturally means that the fraud manager’s role is evolving, too. Although identifying and preventing fraud remain key objectives, fraud managers are becoming closely involved in efforts to improve the genuine customer experience and turn away fewer good orders.
In fact, many merchants now view fraud management as a higher-value, more strategic activity than before, and are weaving it into the fabric of their business. They’re using the data that fraud management teams collect to help identify changes in customer behaviour and purchasing patterns, and support sales strategy formulation.
The next step: recapture lost revenue
Merchants who have fraud under control with a flexible strategy that also optimises the customer experience may now be thinking about other ways to help increase revenues.
One avenue to consider is the fact that issuers generally decline more card-not-present (ecommerce) transactions than card present (in store). Given that some of those declined transactions will be good orders, this represents potential lost revenues.
So that fewer good orders are declined, merchants may want to find ways to help issuers make more informed decisions. This could be achieved by merchants screening transactions for fraud before submitting them. That way, issuers will receive better quality transactions that they’re more likely to accept. EMV 3-D Secure 2.x can also help here, as it allows merchants to share 10 x more data with issuers compared with 3DS 1. It will also provide issuers with the way to challenge and authenticate the payer, if they find the transaction risky.
Conclusion
To keep pace with change and bring in as much business as possible, ecommerce businesses should ensure they:
have a fraud management approach that’s agile enough to respond to evolving customer and fraudster behaviour;
can recognise good customers and give them a great shopping experience.
These materials and best practice recommendations are provided for informational purposes only and should not be relied upon for marketing, legal, regulatory or other advice. Recommended marketing materials should be independently evaluated in light of your specific business needs and any applicable laws and regulations. Visa is not responsible for your use of the marketing materials, best practice recommendations, or other information, including errors of any kind, contained in this document.
This editorial was published in the Fraud Prevention in Ecommerce Report 2020/2021, the go-to source in securing transactions while offering a frictionless customer journey.
About Mark Strachan
Mark is the business owner for the EMEA Managed Risk portfolio at Cybersource and a fraud risk professional with over 12 years of experience. He works with enterprise clients on fraud strategies to reduce risk and optimise revenue.
About Cybersource
Cybersource helped kick start the ecommerce revolution in 1994 and haven’t looked back since. Through global reach, modern capabilities, and commerce insights, we create flexible, creative commerce solutions for everyday life – experiences that delight customers and spur growth globally. All through the ease and simplicity of one digital platform to manage all payment types, fraud strategies, and more. Knowing we are part of Visa and their security obsessed standards, you can trust that business is well taken care of – wherever it may go.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now