- Businesses have witnessed an influx of fraudulent activity over the last few years.
- Merchants and e-commerce brands are feeling the pressure to provide customers with seamless and secure user experiences.
- Partnering with a vendor that uses the most up-to-date data can address fraud challenges and offer a seamless shopping experience.
Fraud is on the rise. As consumers shift more of their shopping behaviors to digital platforms, businesses are experiencing unrelenting fraud tactics emerging from all directions — and the threat landscape only continues to evolve. In fact, according to “Adaptive ML: The Future Of E-Commerce Fraud Management,” an April 2022 research study commissioned by PayPal and conducted by Forrester Consulting*, 97% of global fraud prevention decision-makers at e-commerce companies experienced fraud in the past 24 months*. According to another survey by the Ponemon Institute and sponsored by PayPal, 81% said their organizations are more vulnerable because of digital transformation.
Fraud negatively impacts both consumers and businesses. The Forrester study revealed that respondents saw fraud incidents as a cause of negative customer experiences, losses in sales and revenue, wasted labor for resolving issues, and led to an inaccurate view of the customer. The balance of protecting customers while also delivering on the best shopping experiences and growing a business is the complex situation today’s enterprises find themselves trying to solve.
Moving toward secure selling
In 2021, in the US alone consumers reported losing more than $6.1 billion to fraud, an increase of more than 70% from the previous year according to data from the Federal Trade Commission. This has put added pressure on e-commerce platforms to move beyond just selling. Now, they must also ensure they offer a secure transaction process for all customers.
However, while consumers expect a convenient, frictionless transaction on the front end, businesses are struggling to keep things running smoothly in processes that take place after checkout.
PayPal, which is one of the global leaders in digital payments for more than two decades, cites its work on behalf of both consumers and retailers as key to help meeting this critical challenge for merchants.
“Our two-sided network generates a tremendous amount of aggregate data to help identify and detect fraud while keeping customer experience at a premium,” said Bingjie Bai, vice president of global decision strategy and BI at PayPal. “For every PayPal transaction, we run hundreds of different models using hundreds of thousands of data variables all within sub seconds.”
After all, most organizations are not in the business of managing fraud. They should focus their energy on selling goods and services rather than trying to keep up with evolving threats from fraudsters.
A framework for effective fraud management
Of course, managing fraud is easier said than done. There’s no one-size-fits-all fraud protection solution, so businesses need a system customized to their specific needs.
Here are four factors for merchants to consider when choosing the right fraud solution:
- Focus on preventing chargeback fraud. Chargebacks are a normal part of running a business, but you shouldn’t have to handle them all on your own. Look for tools that can automate the disputes and actions required to process chargebacks.
- Rely on tools and resources that use machine learning. There are tools on the market designed to help automate fraud protection with machine learning. They can help detect and mitigate fraud in real time so you can minimize any damage before your business or customers lose money.
- Collaborate. “Fraud is not the responsibility of one – it’s an ecosystem of responsibility,” Bai said. “Collaborating with in-house experts and industry partners can improve fraud detection and save you time and money.”
- Leverage data. Fraud management comes down to how you use existing data and how relevant that data is to real-time threats. As a merchant, you can’t always know what type of fraud you will face next, and with risk and compliance changing constantly, you need a partner whose datasets are dynamic and broad enough to anticipate what’s coming next.
An efficient fraud protection solution
By providing merchants with a tool that leverages existing data to investigate and identify suspicious transactions, solutions like PayPal can recognize fraudulent patterns and detect instances of fraud before they happen.
“Merchants have had to pivot and change focus as they pursue success in the digital economy,” Bai said. “They need partners that understand that every organization is unique in what they need to help create a safe and secure environment.”
PayPal helps merchants right size their risk with adaptive machine learning which is informed by the transaction data of its 429 million global active accounts and 35 million global active merchant accounts. The platform applies the insights that come not just from those large datasets, but also the risk experience gleaned from decades working with some of the world’s largest companies to provide decisioning that adapts with the fraud environment.
In this way, by reducing merchants’ exposure to fraud and offering the ability to differentiate between legitimate and non-legitimate transactions, PayPal helps merchants increase their authorization and conversion rates, and ultimately, drive more revenue.
“Our merchants use our data science models and products to drive their business forward and protect consumers at each step of their experience,” Bai said.
In the Forrester study commissioned by PayPal, 55% of respondents said partnering with a fraud management vendor enabled them to provide a better customer experience*.
Other businesses can reap similar benefits. Leveraging a fraud management solution may result in a secure and enjoyable shopping experience for customers.
At the end of the day, managing risk doesn’t have to be a barrier to growth. That’s why Bai noted that organizations should collaborate on a solution and see it as “a critical combination of technology and expertise,” not a choice between protecting their business and evolving to meet customer expectations.
Courtesy- https://www.businessinsider.com/sc/how-businesses-can-manage-fraud-and-risk?IR=T