Fraud is an unavoidable byproduct of doing business, but it can be challenging to distinguish paying customers from fraudsters. Balancing risk thresholds to prevent false positives is crucial to avoiding unhappy customers, reputation damage, and lost revenue.
eCommerce retailers can choose the right fraud prevention solutions by knowing their needs, identifying pervasive fraudster tactics, and developing resources to address them while remaining compliant.
Know Your Business
When bad actors steal account credentials or otherwise take over an existing customer account, the perpetrator often uses that account to engage in fraud. This can include payment fraud, phishing scams, and more. A layered defense strategy incorporating account takeover prevention is essential for any business.
Depending on the vertical, specific amounts of personal information may need to be collected to satisfy mandated due diligence requirements. This can create friction during the customer journey, which must be balanced with optimizing a seamless checkout experience. The best fraud detection solutions use passive data collection to verify identity and can be tailored to a company’s risk appetite to minimize customer friction while maximizing ROI.
Fraud detection software should be scalable as your business grows, allowing you to scale up the number of accounts that can be checked automatically or by dedicated fraud teams. Additionally, look for a system that provides transparency in its risk rules so you can understand and modify the logic behind its recommendations.
Know Your Customers
The fraud prevention platform you choose should be capable of scrutinizing a large amount of data to help verify identity and assess risk. This data might include digital footprints, social media lookups, AML checks, etc. It should also be able to optimize user touchpoints while maintaining the smoothest road to checkout.
The most effective fraud prevention solutions provide a flexible set of risk rules that adapt to your evolving fraud strategy, from simple IP blocking to complex action analysis. They should also deploy risk scores to automate user action approvals, rejections, or reviews, enhancing precision and efficiency.
Lastly, fraud detection systems should have powerful dashboards built on intuitive visualizations that make interpreting large amounts of data easier. This is particularly important because fraudulent activity often consists of multiple attacks, making it more challenging to identify one attack due to a single malicious activity.
It’s essential to consider the overall cost of a solution and how it fits into your business’s operational needs and long-term goals. A solution that costs more upfront but provides greater functionality will likely yield a higher ROI in the long run than an inexpensive option that doesn’t offer a comprehensive set of tools to mitigate risk. Additionally, companies should consider the availability of post-sale support to help manage ongoing maintenance and integration.
Know Your Risks
Managing fraud risk starts with an accurate understanding of your business. Companies that prioritize fraud risks and address those threats can fortify their financial stronghold and reduce losses from criminal activity, regulatory impact, damage to brand reputation, and customer attrition.
To effectively manage fraud risk, your organization must have a system of internal controls. These may include segregation of duties, access controls, reporting mechanisms, and procedures for fraud events. Communicating these policies clearly to employees and refreshing them regularly is essential.
It is also essential to listen to your employees. Employees who commit fraudulent activities often give clues through their actions. For example, a sudden change in attitude or a new focus on work could indicate an intention to defraud. Likewise, an employee suddenly working 65 hours a week might be trying to cover up increased payroll deductions for a family member in need.
Successful fraud management also requires a flexible technology platform that can evolve quickly. It should be able to combine data from different products and incorporate external sources like device, biometric, transaction, and account information. This will help teams think across the value chain and identify complex fraud patterns. It will also enable them to respond faster and handle customers’ fraud experiences in a personalized and empathic manner.
Know Your Technology
When choosing a fraud prevention solution, look for the tools best suited to your needs. For example, suppose you understand how fraudsters will attack your business. In that case, you should find a tool to consider (such as an emulator detection system for fraudsters using bots and emulators to take advantage of referral and promotional programs).
You also need a scalable system. Fraudsters are constantly evolving and finding new pathways to scam your business, so you need a solution to adjust risk thresholds in real-time to ensure you’re always on top of emerging threats.
User experience is another essential factor, as a complicated or confusing interface can make it difficult for your team to use the tool effectively. Look for a solution that offers a simple and intuitive user experience, with reports and analytics to help you optimize workflows and track metrics like detection accuracy.
In addition, finding a solution with a robust data protection and compliance framework is essential. This includes committing to protecting your business data and keeping up with regulatory requirements, such as GDPR and PSD2. Finally, you want to avoid the fines and reputational damage from noncompliance. In that case, finding a partner knowledgeable about the specific regulations in your jurisdiction is essential.