Barclaycard Says Retailers Need Detect-and-Protect Mindset to Stop Online Fraud

Payment fraud is expected to jump from $28 billion globally in 2020 to $49 billion in 2030, according to analysts.

Those figures, said Linda Weston, head of core product at Barclaycard Payments, point to the enormous threat online retailers are facing in the payments space, not to mention the added burden of ensuring optimal protection of consumer data.

“Consumers expect retailers to protect their personal data as well as limit the amount of fraud that takes place,” Weston said of the double-edged sword of challenges retailers have to grapple with on a daily basis.

But the introduction of regulations around Strong Customer Authentication (SCA) in Europe, which require eCommerce merchants to work with their issuing partners, has made a huge difference in securing online transactions and easing that burden, she noted.

In fact, recent changes to SCA rules which were announced by the European Banking Authority (EBA) in December will extend the 90-day “reauthentication rule” to 180 days, doubling the time frame during which consumers have to reconsent to third parties accessing their account data.

The U.K., on the other hand, has done away with reauthentication requirements altogether, with customers no longer required to reauthenticate with their bank when a third-party account information services provider (AISP) accesses their bank account data via the open banking scheme.

Overall, Weston said the implementation of the pan-European regulatory requirement has led to nearly 75% of SCA-compliant retailers reporting a significant reduction in fraud incidents.

And while the rules mean that European shoppers may need to complete additional authentication steps when paying online, Weston pointed to the roughly 80% of consumers surveyed by Barclaycard Payments who have embraced the idea of slightly lengthening a payment process in exchange for a more secure process.

“Consumers [surveyed] were comfortable with taking an extra few minutes to complete strong customer authentication because it made them feel [more] protected,” Weston noted, adding that “They understood that it was a fraud prevention measure and that was beneficial to them.”

The Power of AI and ML

With increasing regulation aimed at strengthening user authentication, one might argue that these additional tools and measures can introduce more friction along the user journey. And in an age where consumer demand for convenience is at an all-time high, this is another hurdle merchants would rather avoid.

But Weston said that there are opportunities for certain types of transactions to qualify for an SCA exemption, and using products like Barclaycard Transact — a suite of fraud management and optimization services offered in partnership with fraud prevention provider Kount — Barclaycard Payments clients can better secure their online transactions.

In fact, Barclaycard Transact enables merchants to identify specific low-risk transactions that can be submitted for authorization without the need to go through 3D Secure, enabling retailers to strike the right balance between minimizing fraud and offering a seamless shopping experience, all while maintaining “the highest level of checkout conversion possible,” she explained.

The Kount-powered fraud module also uses artificial intelligence (AI) algorithms and machine learning (ML) to perform real-time fraud checks at the point of checkout, and per Weston, has led to a significant drop in false positives and chargeback rates reported by merchants.

That ability of AI to learn patterns and trends means retailers can quickly identify fraud or potentially suspect transactions, she said, adding “That coupled with machine learning means that the outputs can be generated on a much more real-time basis, rather than being identified post-event.”

Adopting a combination of AI and ML capabilities also enables merchants to be “more proactive and on the front foot to fraud prevention rather than on the back foot with remediating activity that’s already occurred,” she said.

Overall, Weston said these tools will be critical in minimizing the friction that exists in the customer journey. And to achieve maximum impact, retailers need to change their risk mindset to level the security playing field and increase their chances of effectively tackling online fraud.

“We’re encouraging retailers to rethink with a detect-and-protect mindset so that they can detect fraud, protect themselves and then ultimately optimize their transaction processing,” she added.

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