The payments ecosystem spends 99% of its time and money on the 1% of the people who are out to exploit the system: the fraudsters. It’s now time to turn the tide.
Nuvei Chief Operating Officer Vicky Bindra and Prove Chief Product Officer Nicole Jass told Karen Webster that instead of simply focusing on keeping the bad guys out, it’s time for merchants to focus instead on letting the good guys in.
“The whole discussion on fraud has evolved from identifying the transaction to following the experience,” said Bindra. That means that something different has got to be tried.
Call it the “good guy” strategy.
For decades, merchants have thrown everything they can at the problem in terms of time, money and technology. And yet fraud rates are on the rise, while false positives stymie consumers and conversion rates.
The merchants lose, having spent significant effort incentivizing consumers to come to their site, and then ultimately struggle with the false positive problem that too often is unable to distinguish the good guys from the bad.
Bindra and Jass said there is a better tool in the toolkit for merchants to turn their focus to the good guys who want to buy instead of the bad guys who want to scam. And that toolkit involves using deterministic signals and authentication (tied to mobile devices) that provide for an uninterrupted consumer experience while authenticating users in real time.
The merchants are in a tough spot because consumers want a friction-free experience while they’re browsing and shopping with their mobile devices and they expect to be protected from fraud.
And fraudsters have become very clever.
“They’re increasing in intensity and the sophistication with which they can manipulate systems,” said Bindra. And, added Jass, fraud is shifting “further up the consumer experience,” and account takeovers are becoming more commonplace, especially in the age of digital commerce.
Fraudsters are finding success in approaching unwitting victims and claiming they’re from Amazon or Netflix because the odds are that the consumer has accounts at one, if not both, of those providers. First-party fraud, where goods are ordered and sent, and then disputed by the criminal who says they never got what was paid for, is a particular favorite.
Thus, the merchant mindset on fraud is changing. Bindra said that platforms and providers are taking a closer look at identifying consumers and their buying behaviors, examining whether they’ve bought those items in the past, and what the preferred payment methods are. Tokenized credentials and other high-tech tools can help safeguard consumers as they make their way across sites and transact.
“It’s no longer just a matter of looking at transactions and verifying, with 20 parameters, whether the transaction is fraudulent or not,” said Bindra. It’s the combination of cryptography and authoritative data, collected and analyzed in real time that make the consumer a key “source of truth.”
There’s a flip side to following the consumer rather than just trying to trap the fraudsters: The customer experience improves as a result, and false positives decline. And we get ever closer to coveted, one-click commerce.
The key to getting there, Bindra and Jass agreed, lies with data. And harnessing that data, through the aid of platforms, is fostering a sea change within the enterprises themselves.
“Historically, fraud teams and loyalty teams or customer acquisition teams have existed within different silos of an organization,” Jass said. “But what we’re seeing now is that these teams are coming together to tackle the same problem, but from different sides.”
Robust data sharing and customer insights, along with robust authentication (via platforms such as Nuvei and Prove), add layers of analysis to the observation of consumers’ movements across sites.
“If all I’m relying on is a risk-based model that’s going to look only at behavior, I’m going to get it wrong,” said Jass.
Shopping for a watch at 2 a.m. in Puerto Rico may seem suspect until that behavior is triangulated with mobile devices and cryptographic SIM keys (as is part of Prove’s model) that can make the most optimal decision and let the good customers in.
“The mobile phone’s right next to all of us, so the deterministic signal from the phone allows for those new behaviors,” she said.
The confluence of technology and a determination to keep good customers transacting leads to a moment of truth for the commerce ecosystem, Bindra said. It’s the moment of truth where merchants identify their loyal customers and mainstream audiences.
There are several such moments, said Jass and Bindra, and they can differ widely depending on the consumer segment.
A moment of truth, for example, could be how quickly consumers get what they ordered — and so that “moment” is centered on convenience, said Bindra. In another example, a repeat customer might value, above all else, the ability to make payments quickly, and to walk out of the brick-and-mortar setting with minimal interactions in the aisle or at the register or on the website, all thanks to stored credentials. Loyalty points are gaining currency as a way to keep customers transacting with particular merchants.
There’s the chance for merchants to improve their “post-checkout” moments of truth too. Bindra said that data driven insights can help streamline the consumer experience so that trust/authentication of that consumer makes it easier to void a transaction in case the order never arrived or to make a return (in some cases, would-be-buyers might be hesitant to buy an item because they’re worried about post-purchase pain points if what they’ve bought is not what they thought they wanted).
“When you’re one click,” said Bindra, “you can do all this, but you’ve got to identify who your best customers and profiles are … so that it becomes easier to identify and support the good guy.”