The new era of collaborative intelligence

The rise of a more collaborative – and connected – intelligence is the only way to combat the compounding ecommerce disputes and customer experience challenge, Keith Briscoe, Ethoca, reveals

In the year since I wrote my last editorial for The Paypers, the pace of change in the payments industry has continued to astound.

The September PSD2 deadline has come and gone, with an industry still largely unprepared for SCA (Strong Customer Authentication) implementation. Massive acquisitions and mega-mergers (FIS – Worldpay, Fiserv – First Data) continue to break down silos between merchant and issuer processing services, ultimately creating the opportunity for more innovation and cross-industry collaboration. Card brands like Mastercard made bold moves by acquiring collaboration-based technology providers such as Ethoca and focused on shared intelligence to solve the ecommerce fraud and disputes problem.

Above all, customer experience and frictionless commerce continue to be the ‘holy grail’ differentiators sought by every participant in the ecosystem. The challenge remains that fraud and disputes – particularly those stemming from the rampant friendly fraud problem – create friction, cause cardholder confusion, and strain a chargeback system ill-equipped to productively resolve them.

Both issuers and merchants are rightly focused on ensuring the best possible payment journey for their customers, and that requires a very fine balance. Overly aggressive fraud controls can disrupt the purchase journey, driving up false declines by both merchants and issuers – estimated by Aite Group to be a USD 331 billion dollar problem in 2018. But if fraud controls are not stringent enough, they open a customer’s purchase journey to a negative dispute experience that erodes the trust they have in their preferred merchant brands and banking providers.

The need for a more collaborative – and connected – intelligence

This challenge is being compounded by a digital commerce environment that is blurring the line between true fraud, simple customer confusion and, increasingly, abusive cardholders who have learned how to game the very dispute system designed to protect them. Collaborative – and connected – intelligence throughout the entire digital purchase journey is the only way to solve this slippery, complex challenge. It also creates the opportunity to finally move beyond an antiquated process for resolving disputes to putting the customer relationship front and centre.

But what’s that going to take? Here’s how I think we’re finally going to make a breakthrough impact as an industry in 2020:

1. Define the new class of friendly fraud disputes – Friendly fraud disputes have recognisable patterns. They look like legitimate transactions (because they are), and they contain a trail of (Device ID, IP Address, previous purchase history and usage behaviour etc.). We can begin to connect the dots with intelligence in ways we simply could not before, but that requires a standard definition of this now pervasive dispute type. What we can define, we can now identify – and then take clear, aligned action to solve.
2. Move dispute resolution upstream – The longer disputes linger, the more harm and expense they create for every player in the ecosystem. Collaboration-enabled technology bridges the intelligence gap between card issuers, merchants, and supporting service providers. Giving customers clarifying insight (enriched transaction and merchant information, full digital receipt) into their own purchase behaviours in the moment is paramount. Ideally, this occurs early in the post-transaction journey – in the digital banking app. This is by far the most effective way to resolve cardholder confusion well before the formal disputes stage. The earlier we prevent and resolve friendly fraud disputes, the better the experience for all.
3. Aligning industry interests – Current dispute liability rules make no accommodation for the ‘friendly fraud’ class of disputes when of course it’s the cardholder who should be taking rightful responsibility for their purchases. Getting both banks and merchants to share intelligence at scale in all banking channels (mobile app, online, digital assistant, and in the call centre) is not only the most effective way to solve the problem – but it also sets the stage for more equitable distribution of liability in the future.
4. Thinking beyond disputes – Progressive digital and challenger banks have figured out something critical: creating the richest possible engagement experience in the mobile app not only drives deeper relationships with cardholders through extended services like loyalty, it drives greater purchase transparency and clarity. Creating a great customer experience automatically solves for at least part of the overall friendly fraud problem (non-malicious disputes).
5. Closing the loop – Disputes occur at the tail end of the customer purchase journey, when a transaction has typically ‘gone wrong’. Collaborative – and connected – intelligence breaks down the barriers that can occur during the stages of the transaction lifecycle. By linking the intelligence gleaned during the dispute resolution phase to the customer authentication and transaction authorisation stages, we can make better – and more frictionless – approval decisions.

While this overall journey toward the optimal customer purchase experience is going to be a multi-year endeavour – 2020 promises to be a needle-mover. The pieces are in place – industry collaboration and intelligence sharing at scale are poised to be the key catalysts to bring about a long-needed transformation.

This editorial was first published in the Fraud Prevention and Online Authentication Report 2019/2020. The Guide covers some of the security challenges encountered in the ecommerce and banking, and financial services ecosystems. Moreover, it provides payment and fraud and risk management professionals with a series of insightful perspectives on key aspects, such as fraud management, identity verification, online authentication, and regulation.

About Keith Briscoe

Keith Briscoe leads Ethoca’s global product and marketing functions, a role spanning the development of Ethoca’s suite of collaboration-based fraud/chargeback mitigation and transaction acceptance solutions, as well as integrated marketing programmes. His mandate includes product strategy and management, new product innovation, competitive analysis, experiential marketing, integrated marketing campaigns, public relations, analyst relations, content strategy, and stakeholder communications.

About Ethoca

Ethoca is an award-winning provider of collaboration-based intelligence and technology solutions that empower businesses around the world to fight fraud, prevent disputes, and improve the customer experience. Powered by the ever-growing Ethoca Network, their solutions provide rich intelligence throughout the customer purchase journey and close costly communication gaps between all stakeholders in the payments ecosystem. These include thousands of the world’s biggest ecommerce brands, the largest banks, service providers, and consumers. For the first time, fraud, customer dispute and purchase insights are now available and actionable in real time – delivering significant revenue growth and cost saving opportunities for all. Ethoca was acquired by Mastercard in April 2019.