Fraudulent transactions are on the up, but with more information and tools at their disposal, online and multichannel retailers need to get up to speed if they’re going to stem their fraud losses.
Fraud losses are on the rise and it’s costing businesses their bottom dollar, according to the 2017 Financial Impact of Fraud Study: Exploring the Financial Impact of Fraud in a Digital World.
The study reveals the biggest impact of fraud has been to online retailers, who have lost almost 10 percent of revenue to fraud on average, increasing 13 percent from its 2016 level.
But as it turns out, online and multichannel retailers are often their own worst enemies when it comes to fraud losses.
The fact is, fraudsters are getting more sophisticated and are targeting more businesses all of the time. And the issue looks like it’s here to stay. Therefore, businesses that are dragging their heels on improving their fraud detection and prevention capabilities are only costing themselves money.
If you’re tired of losing revenue in this fashion, then here are five ways to start reducing transactional fraud losses:
You should expect a fraud engine to detect and prevent transactional fraud right from the start. And it should be available for you to analyse transactions through a combination of user-defined rules and machine learning.
What sets some fraud engines apart from the rest is real-time and near-real-time self-service rules for the detection and prevention of fraud and other suspicious transactions. The software achieves this by looking at historical data and transactional trends, calibrating actual transactions versus chargebacks and recommending rules for future transactions in milliseconds.
In English? A good fraud engine is one that has access to the best information, tailor-made for your business, so that it can flag potentially fraudulent activity almost as soon as it begins to happen.
Once more, even simpler? A good fraud engine should begin saving you money in lost transactions from the moment it’s configured.
While fraud costs hurt, the bigger hit to the bottom line actually comes from false declines or false positives – legitimate sales that retailers don’t ship because they’re incorrectly flagged as fraudulent.
When you turn down a good customer with a legitimate order, you lose that order. And you may well lose that customer for good.
Fraud engines powered by artificial intelligence and machine learning anticipate fraud based on algorithms and historic behavioural data, detecting patterns and automatically creating new rules to address trends.
What’s the takeaway here? Don’t throw the baby out with the bathwater. If you’re fraud detection capabilities are aggressive but not particularly sophisticated, you could be tossing valuable customers out with the trash.
3D Secure 2 (3DS2) is a more data-driven approach to fraud detection, meaning it’s less intrusive to customers.
As a result of working to reduce the checkout drop-off rate caused by 3DS 1.0, there are now better ways to increase sales, detect fraud and potentially shift liability away from your business.
With the heavy lifting of day-to-day manual fraud detection, analysis and rule creation, your fraud team can use AI tools and focus on strategic growth.
If you’re devoting more resources and people to fraudulent transaction detection and prevention, that’s a signal that you need to take a step back and evaluate your current situation.
Not only should you consider acquiring best-of-breed fraud engines to perform your fraud detection and prevention, you also need the best people available to manage these functions for your business.
Unfortunately, such experts aren’t easy to come by on the job market, nor is it an inexpensive proposition to hire a team of them and train them to spec.
Luckily there’s an increasing trend towards outsourced fraud management, which presents a low-cost, effective alternative to developing the skills required in-house.
Any outsourced, specialised team of fraud management experts should provide support for data analysis, rules-building, and recommended best practices customised to your business needs. They’ll be ahead of the latest attack threats and evolving fraud patterns so they can deal with the latest types of fraud before you’re even aware of them.
So, what’s holding you back?
MYOB PayBy can provide a recommendation on where your fraud pain points are and tailor a fraud management solution to help you reduce your fraud losses – and it’s FREE.
For more information on MYOB PayBy, visit myobpayby.com.