Out of the ever-growing list of things retailers have as priorities, stopping fraud — not selling more goods and services — has now claimed the online retailer’s top spot. That’s the finding of Forrester’s 2016 "State of Retail Payments 2016" report.
Michael Reitblat, CEO of Forter, isn’t at all surprised. The mere increase in the number of fraud attempts year over year and quarter over quarter is enough to shake even the most hardened eTailer to her knees. But, Reitblat said, making fraud a priority often comes with putting practices in place that might provide the illusion of preventing fraud but results in delivering a less-than-optimal solution for that merchant’s best customers.
In fact, Reitblat told Karen Webster, one of the best courses of action for a merchant to take might be to make fraud someone else’s priority so that retailers can get back to doing what they do best — delivering a great customer experience and increasing sales.
The Shifting Fraud Focus
There was a time, Reitblat said, when the biggest fraud concern most retailers had to worry about was how fraudsters used devices to produce counterfeit physical payment cards.
But the rise of online commerce and the years of online data breaches that have become an almost daily occurrence mean there is a massive amount of compromised payment and account data that fraudsters can use to perpetrate their activities on an even larger scale.
How Times — And Priorities — Have Changed
Just two years ago, Reitblat noted that retailers were mainly focused on implementing EMV and using tokenization to secure the payment data and other personal information of their customers.
A focus, Reitblat said, that was driven by the “payments” part of the organization — either the finance or the technology teams whose job it is to make sure payments work — and fraud is prevented. But that, he said, actually creates new and different risks for a retail organization.
All too often, Reitblat said, those departments end up working on the payments opportunities and problems from only their own perspective — as a cost of doing business. He said that the payments and risk have been assigned to a specific part of the company and left there, failing to recognize that payments isn’t just an enabler of commerce anymore — it’s actually become a driver of growth.
A focus that also gave the fraudsters the incentive to find a new place to play.
"EMV is not a solution; it's a piece of a solution,” Reitblat emphasized. “As we all know, when things become more difficult for [fraudsters] in one place, they don't retire and get a decent job; they move to the next place of least resistance, which, in the fraud case, is online.”
It’s no surprise then that eCommerce has become a much larger and important focus for both retailers and fraudsters.
Why Outsourcing Matters
Reitblat said that, once, fraud prevention was all about stopping fraudulent transactions, limiting a retailer’s losses, protecting what they had. He further stated that having fraud prevention as the overarching focus can have the effect of preventing fraud but also blocking sales, if it’s risk-averse.
“We are seeing retailers implementing more and more different types of wallets, loyalty programs, which all create — for them — more risk. The consumer expects no friction from the checkout experience, while many fraud prevention measures build friction into the process. Security controls have to adapt to new checkout and retail environments, not control it,” Reitblat explained.
Now, Reitblat said that the best fraud prevention systems are accurate enough that retailers can block fraud and grow sales at the same time, by increasing approvals, speeding checkout and improving customer experience.
“That’s a huge shift,” he explained.
A shift that Reitblat also said has influenced how retailers think about managing fraud — by leaving it to someone else to do on their behalf.
In the past, it was commonplace for retailers to own their own trucks to do deliveries, host their own servers for building an IT infrastructure and even create and operate their own point of sale.
Advancing technologies, coupled with the growing costs of doing business, have changed that outlook.
Now, merchants are relying on third-party providers that specialize in specific areas of business to do what they do best.
Reitblat said this decision also brings retailers the benefits of scale.
"From the start, we’ve been interested in combining the removal of the fraud burden with transparency into data. The merchant shouldn’t be worrying about fraud anymore — it’s not their area of expertise. But they should still be able to benefit from the data that the fraud prevention system learns. With Forter, they do. A whole section of our interface is devoted to business and fraud-related insights, which merchants can put into action in a wide variety of ways.”
In the case of Forter, every fraudster that its platform is able to detect is no longer able to do damage to the other retailers in its network. In addition, which Reitblat pointed out as even more important, every suspicious-looking but actually good buyer that Forter takes on the risk of approving can confidently have that smooth buying experience on any other merchant’s site that uses Forter, once they’ve been identified as a legitimate customer.
At the end of the day, Reitblat noted that having access to the right data is what’s key to making the right fraud decisions.
"There's no one-solution-fits-all. It's making sure every retailer gets what they need and, at the same time, running the best service on the back end,” Reitblat concluded.