SECURITY
NAVIGATING ONLINE FRAUD IN 2016
6 E-TAILER ESSENTIALS FOR THE YEAR AHEAD
By: Bill Zielke Chief Marketing Officer Forter
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ew technologies and new ways of doing things are driving change in all aspects of our lives, and every year seems to mark the increasing speed at which these shifts occur. This is especially visible in e-commerce, which is by nature so quickly and profoundly impacted by consumer behavior and expectations - and if that’s true for e-commerce, it’s equally true for the online criminals who plague internet retailers. Many factors will affect e-commerce and online fraud over the next year - from EMV to machine learning to the growth of mobile shopping. But if e-commerce merchants want to know what they really need to know about online fraud prevention, and where they should be concentrating their efforts, this is it: Fraud prevention should drive revenue.
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Payment Quarterly | Q1 2016
STOP THINKING THAT FRAUD PREVENTION IS ALL ABOUT COSTS That’s probably not what you were expecting when you saw an article about fraud prevention. Traditionally, fraud prevention has been considered as being about loss limitation - its job is to ensure that the business doesn’t lose too much money to fraudsters. That role is still crucial, of course, but if companies continue to consider that as the only relevant factor when it comes to fraud prevention, they’re going to suffer from unintended negative consequences – and they probably won’t be combating fraud as effectively as they might be, either, since the latest technology is better at both stopping fraud and promoting profit. In 2016, as customer expectations become even more demanding and it becomes increasingly important to provide smooth, seamless checkout and fast delivery, retailers are going to start realizing what an overly risk-averse approach to fraud prevention does to their business - and they’re going to start wanting to do something about it. Here are 6 things that retailers will begin doing in 2016 to improve not just their fraud prevention, but the impact that their fraud prevention has on their business.
AUTOMATED FRAUD PREVENTION Manually reviewing a transaction takes an average of 5 minutes. But today’s online shopper doesn’t want to wait 5 minutes. Today’s online shopper doesn’t even want to wait 5 seconds. In fact, Kissmetrics has reported that 40% of people abandon a website that takes more than 3 seconds to load. That doesn’t leave retailers with much choice: if they can’t provide real-time service, they’ll lose customers. At the moment, the overwhelming majority (81%) of e-tailers rely on manual reviews to block fraud. Even companies using partial automation continue to rely heavily on slow, expensive manual review. According to Lexis Nexis, in 2015, nearly half (48%) of all transactions were flagged for fraud by automated systems. Close to 46% of flagged transactions get sent for manual review, leaving merchants to render a decision in almost three-quarters of these flagged transactions. That means that even where automation is present, manual review is still a major part of the process - something that is reflecting in the budget: a quarter of the fraud prevention budget goes on manual review. Until recently there was no option when it came to fraud prevention manual review was an essential part of the process. But that’s no longer the case: full automation is now possible, it’s extremely good at stopping fraud without stopping genuine customers, and more and more retailers are going to start adopting it. REAL-TIME FRAUD PREVENTION The great gain from full automation is real-time fraud prevention, something that comes with a number of benefits, and which retailers will be increasingly interested in as the pressures of a real-time world become increasingly apparent. Perhaps the most relevant at this time of year, as retailers strive to learn from the holiday season of 2015, is that during busy times, such as holiday periods, there will be no backlog of orders caused by manual review. Realtime, automated fraud prevention works instantly all year round, so customers