Fraud is an inevitable part of online business and causes massive money loss every year. There are a number of anti-fraud tools on the market, but only those focused on multi-level risk protection and solutions that adapt to new fraud patterns in real-time can effectively reduce suspicious activity and result in fewer false positives.
With so many transactions happening every day, online fraud is around and criminals are shifting their focus to services with less effective security systems. Fintech companies still have a lot to do to improve security and simply detect activity that raises a red flag, but there are also practices that merchants should stick to in order to prevent fraud.

The scale of this phenomenon is growing, causes huge losses, and affects consumers in Europe, not to mention associated costs for businesses. With that being said, ThreatMetrix reported that European online businesses had to face 80 million fraud attempts in Q1 2018, based on 1.9 billion digital transaction analyzes.

According to analytic software company FICO, among 19 European countries, the card not present fraud has gone from 50% of fraud losses in 2008 to 70% in 2016 and the losses hit approximately €1.8 billion. It is expected that by 2020 fraud will have resulted in losses of $35.4 billion.

Technological challenges

There are companies that develop solutions to prevent and eliminate fraudulent activity by doing everything in their power to provide businesses with the speed they need. This is why we can have secure immediate, one-click payments or rapid customer verification within seconds. Each of these is available at any time, anywhere.

Companies specialized in online payments are turning to machine learning and AI-based tools, as they allow the system to react quickly. However, basic machine learning solutions as we know them, are inaccurate, as they slowly adapt to new fraud patterns that spring up like mushrooms.

Moreover, companies that try to block suspicious attempts, based on typical scoring that flagged risky transactions, often end up with legitimate customers that scored as fraudulent (known as false positives). It’s not hard to guess that it equals significant revenue losses. This is why there’s an urgency to create solutions which are more accurate than rule-based systems.

“We’ve noticed that most of the anti-fraud solutions are based on outdated technology so they can’t handle more complex fraud attempts,” says Lucas Jankowiak, SecurionPay CEO. He also introduces their anti-fraud, AI-based filters that adjust to specific business models and traffic, which is more accurate than static filters based on well-known patterns and is much faster to adapt to new fraud patterns in real-time.

Both payment system and anti-fraud tools work simultaneously, so when the buyer’s activity sets off alarms, merchants can react immediately. One of the most important things, according to Jankowiak, is spotting fraud without disrupting the customers’ experience. This is why companies like theirs use innovative and advanced technology from the very start to spot anomalies and identify fraud faster by making it more accurate. It’s scalable and makes it possible to identify fraud as it emerges in real time.

“Currently, we are working on a solution based on strong customer verification that will give online businesses the ability to accept zero-fraud payments. Hence, in effect, they can stop payment fraud without blocking real transactions,” says Jankowiak.

Countering fraud over

Online companies need to fight fraud based on experts’ knowledge, as it’s almost impossible to spot fraud without any specialist help. With the right tools and processes in place, they can have multi-level risk protection systems and a set of anti-fraud tools which allow them to do their in-house risk management and react immediately when they spot indications of fraudulent activity. They can create rules to effectively manage incoming payments and evaluate them regularly.

What’s also important, is to perceive fraud as part of a specified industry or business model, not globally. This is why having adjustable anti-fraud solutions is a must as filters and rules should be set accordingly to a specific merchant, their business model, and payment scenarios. It’s a common truth that putting all eggs into one basket could break the business, general settings won’t bring expected results.

The thing is to find a reasonable balance between fraud detection and customer experience. Choosing various methods of fraud prevention, merchants should not only seek the best-suited solutions for their particular industry and payment scenarios, but also ones that minimize customer losses as much as possible. With AI-based solutions, it’s much easier to spot fraud attempts accurately without interrupting sales or declining genuine transactions.

Furthermore, having a payment processor that works with various acquiring banks can work wonders for merchants, as they can split the risk, reduce costs and improve their payment experience thanks to smart routing. If the connection with one bank fails, a payment goes through another account, without interrupting the entire payment process.

In general, a layered approach can result in reducing costs spent on manual reviews and fewer false positives which, nowadays, lead to $118 billion in foregone annual revenue. Also, communication with customers can also help prevent many of the reasons for disputes so merchants should react quickly to customers doubts or refunds.

Final thoughts

Companies usually place their concern of losing money above the customer convenience and, in most cases, they end up not only with issues of fraud, but also with consumers that don’t want to use their service.

Static data is no longer sufficient so companies that struggle with massive money loss due to fraud should look for more effective solutions and choose a reliable payment partner that knows how to spot anomalies and identify fraud faster by making it more accurate. It’s scalable and makes it possible to identify fraud as it emerges in real time.

Author: Sandra Wróbel-Konior, Content Marketing Manager at SecurionPay, payment platform that delivers Always Better Payments.

Sandra Wróbel-Konior

You can meet SecurionPay at the upcoming TES Affiliate Conference in Prague, 14-17 September 2018.

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