Merchants and PSPs are now, more than ever, focusing on the shopping experience of customers and are trying to maximise their conversion. Fraud prevention tools continue to be a key topic that impacts merchants’ overall conversion and revenue, as well as the overall customer shopping experience at the site.
Very strict fraud solutions can cause friction or even prevent transactions from going through, which is an inconvenience to customers. Therefore, merchants need to set the right balance to maximise their revenues while looking after the end consumer. In EMEA, the PSD2/SCA regulation is well underway. SCA is working for some types of transactional fraud but not addressing all the emerging new fraud types such as ATO (Account Takeover), Friendly Fraud, and Return Abuse.
In the past 12 months, we have also seen customers returning to brick-and-mortar stores, as countries are emerging out of COVID-19. Even so, ecommerce is still expected to grow meaningfully in the next few years. Most of the large merchants are focusing on their omnichannel strategies as they try to create seamless experiences for their customers, whether they shop in physical stores or online.
Fraud occurs throughout different stages of the shopping experience; it doesn't just happen at the checkout or during the transaction. In the past, most fraud attempts focused on the checkout or transaction point, but we are now experiencing a shift in the modus operandi, so that it can be present during all stages, from account creation (Account Takeover) to after the item is shipped (chargeback fraud), and right through to the return process (returns fraud).
Operating on a global level means complying with different regulations across different jurisdictions. How can merchants mitigate this complex process?
Every region has unique regulations, fraud tendencies, and market behaviours that impact a merchant's customer experience and its ability to maximise conversion or revenue.
For example, in the EMEA, the PSD2 regulation enforces strong customer authentication (SCA) while maintaining the maximum rate of frictionless transaction. However, in the US, 3DS is used far less than in Europe and other regions, as it creates additional friction and problems.
At the same time, LATAM has some of the lowest average overall authorisation rates in the world due to higher fraud rates and low issuer approval rates, which means it is imperative to work closely with experienced partners in the region that can both reduce fraud and provide a chargeback guarantee to the merchant. In other words, PSPs must use experienced providers that understand the nuances and differences in each region and offer appropriate service for merchants.
Commonly, Signifyd works with large merchants that require different solutions in each of the regions they are operating in, which means there are no one-solution-fits-all scenarios. We provide different solutions for our merchants operating across these geographies as what works for customers in India might not be suitable for those in the US, and solutions for the EU market might not be relevant for Singapore, for example.
A single PSP or a merchant's historical data is not as diverse as a fraud provider’s network of data that spans across merchants and PSPs. A good solution provider with access to large merchant side networks or consortium data would overlay machine learning and AI on top of that network, to maximise approvals and minimise false declines (declining good customers).
Additionally, merchants and PSPs who leverage consortium data and use solutions that have machine learning and AI can provide a higher quality decision pre-authorisation and achieve higher overall conversion rates. This leads to a higher level of customer satisfaction because the customer experiences less friction in the shopping process.
A high-quality decision from the start reduces future fraud and chargeback problems that merchants and PSPs must deal with. Moreover, a chargeback guarantee solution based on AI and ML removes chargeback issues for merchants.
Even with these solutions in place, fraud is never 100% preventable. So, if it does happen, merchants and PSPs should use AI and machine learning-based dispute tools to fight chargebacks and abuse. They can help identify challenging cases like friendly fraud and help prioritise the chargeback cases to fight, so that merchants get the best value for their effort.
PSPs can differentiate themselves by offering value-added services such as fraud solutions, chargeback recovery, and guarantee. Utilising a provider with advanced decisioning techniques, including machine learning and AI, will reduce fraud significantly, while increasing conversion rates.
The key to ensuring that PSPs can differentiate themselves is to properly review, verify, and approve transactions by using data.
The retail sector has become a plethora of data, much of which PSPs cannot access or view. By enabling PSPs to convert purchases based on the data available, behavioural trends, and assessment of overall risk, fraud protection providers like Signifyd can build trust across the payments landscape by powering Fearless Payments technology, one transaction at a time.
Merchants cannot afford to lose money because they are not using effective anti-fraud tools to get the maximum conversion. If PSPs are offering these services to merchants, they can remain relevant even through tough economic times and still help merchants obtain maximum profits.
Signifyd’s core solution covers customers from the account creation stage to the fulfillment stage of order handling, as well as returns and disputes.
Signifyd has one of the largest merchant site data networks in the world and our machine learning and AI tools use this network to make accurate decisions through the entire life cycle of the ecommerce shopping journey. Additionally, we can apply specific solutions in each region to maximise merchants’ potential. For example, in the EMEA region, we provide transaction risk analysis and SCA exemption solutions, to maximise frictionless transactions for merchants, as part of the PSD2 regulation in Europe.
In other regions where PSD2 regulations don’t apply, like the US, Signifyd is able to boost approval rates for merchants while protecting against fraud and fraud losses. We are also closely working with issuers to provide them with additional data fields during the transaction process, which gives us, and our merchants, increased conversion rates, while reducing false declines.
This editorial is part of The Paypers' Fraud Prevention in Ecommerce Report 2022-2023, the ultimate source of knowledge that delves into the world of fraud prevention, revealing the most effective security methods for companies to stay one step away from bad actors and secure their businesses.
Okan Ozaltin is GM of Payment Solutions at Signifyd. He is focused on creating solutions that can be leveraged across the Payments Ecosystem to deliver higher authorisation rates and lower friction for customers. Before joining Signifyd, he was Payment Acquiring product lead for Fiserv in EMEA.
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