How shared data can turn a complex payments ecosystem into one of trust

What trends have shaped the fraud landscape so far this year?

Card-not-present (CNP) fraud has stood heads and shoulders above any other trend this year, making up 76% of fraud committed. This is a significant issue, especially when you consider that CNP transactions make up only 38% of global credit card transactions. The advent of one-click shopping and the sheer volume of available ecommerce merchants has made it easier for fraudsters to slip through traditional identity verification controls and wreak havoc on businesses.

It’s critical that merchants and payment processors alike invest in a holistic fraud prevention strategy that enables good customers to be approved faster if they want to stay ahead of the fraudsters and keep their customers.

Is the PSD2’s Strong Customer Authentication the answer to the many fraud issues merchants and banks meet?

Multi-factor authentication (MFA) is incredibly important for protecting both merchants and customers, but for cases like synthetic ID fraud and fraudulent account openings, the fraudsters are able to simply set up their own MFA and continue using stolen or fabricated credentials. Merchants must move beyond the minimum requirements, such as MFA to a more holistic and proactive fraud prevention strategy that utilizes globally sourced data for digital identity verification.

Moreover, there is a lot of debate within the industry over the challenge in keeping a balance between frictionless customer experience and strong security after SCA. What strategies should organizations implement to overcome this challenge?

The best strategy for stopping fraud while maintaining a frictionless customer experience is to implement a fraud management policy that focuses on approving the trustworthy and loyal customers faster than the rest. We advise organizations to partner with a vendor that can verify legitimate customers at lightning speed and focuses on pushing only the riskiest transactions and data to more thorough manual review processes. I always recommend taking advantage of the technology around machine learning and custom rules to automate as many approvals as possible, ensuring that customers with good data are approved without ever seeing the verification process slowing them down.

In which way will fraudsters take advantage of the exemptions and out-of-scope transactions, and how can they be stopped in exploring the loopholes?

Fraudsters may move to low value or more unusual transactions, such as making purchases that are less than EUR 30 to avoid regulatory scrutiny. While on the surface this may sound like a boon for merchants, studies show that fraud often costs up to three times the value of the transaction itself. Merchants must be proactive in implementing data-driven fraud prevention strategies to stop fraudsters from ever making purchases in the first place.

Since trust is key when it comes to identity-based transactions, how can the industry best secure digital Identities in a connected world, to create an ecosystem of trust?

At Emailage, we often think of fighting fraud as a team sport. That is to say that we rely heavily on globally sourced data shared by our partners and customers to help each other out. When an email address is confirmed as associated with fraud, that email address is flagged across our network – making the data more dynamic than internal blacklists which can only stop repeat offenders. Other customers benefit from this shared data and each transaction makes our network stronger, all rooted in a single universal identifier: the email address. Shared data and deep learning algorithms will ultimately be the key to stopping fraud before it begins, and by extension, fostering trust with legitimate customers.

For more information about creating an ecosystem of trust through digital identity verification, watch the full webinar presented in partnership by The Paypers and Emailage.

About Chris Thomas

Chris has worked in the fraud prevention industry for over 20 years, specialising in helping organisations in the financial services, insurance, telecommunications and ecommerce industries protect their businesses from criminal attacks. Latterly, Chris built the Fraud and ID business unit for Experian across EMEA, launching numerous data sharing schemes across the region that enable organisations to quickly share intelligence and combat the growing risk of cyber-fraud. Chris is widely recognized as an expert in fighting the ever-growing threat of cyber-fraud and is now with Emailage to spearhead the development of EMEA and help bring the power email risk assessment and digital identity to organisations across the region.

Emailage, founded in 2012 and with offices across the globe, is a leader in helping companies significantly reduce online fraud. Through key partnerships, proprietary data, and machine learning technology, Emailage builds a multi-dimensional profile associated with a customer’s email address and renders a predictive risk score. Customers realise significant savings from identifying and stopping fraudulent transactions.