PNC on Fighting Transaction Fraud With Data

Acquirers face a formidable challenge in helping merchants address an ever-evolving category of commercial risk: transaction fraud. This issue is pervasive and plagues merchants regardless of their size or level of growth, according to Chris Ward, executive vice president and head of data, digital and innovation for PNC Treasury Management. Fraud prevention is also tied to other key components of risk management, such as efficient transaction monitoring, data tracking and user authentication.

“There are a couple of key challenges that merchants are experiencing, one of which is what I call the ‘match game,’ where money comes in through some means and then the information associated with that payment comes in through a different means,” Ward explained. “So, businesses have to manually match the payment and the data together to apply it to their receivables system.”

Data management processes that provide incomplete or imbalanced snapshots of transaction activity and payments can be especially problematic, he said. A lack of cohesion can keep businesses from efficiently managing their receivables and ultimately impact their relationships with business partners.

“Businesses need to think about the dollars and the data associated with the payment moving together,” he noted. “That’s the only way a business can tell a customer that their payment has been received and that it has been applied.”

Ward explained that managing fraud risk is not just a matter of identifying issues after an event. Businesses must instead shift toward proactively blocking potential fraud with innovative technologies and solutions, such as the use of aliases to protect sensitive consumer data during transactions.

“A key challenge in today’s digital world is that businesses — and merchants, in particular — must protect themselves and prevent fraud,” he said. “One of the main ways we look to address this challenge with our clients is by facilitating payments via aliases. In fact, PNC Bank was actually one of the first banks in the country to connect Zelle to the real-time payment networks so that aliases could be used instead of banking information to transact between financial institutions.

“I think we’ll continue to see the use of aliases blossom over the next couple of years, in particular for corporate customers. The use of aliases will remove the need to maintain banking information in their systems and will improve the security of making electronic payments while also eliminating friction in the process.”

When innovative, efficient fraud prevention practices are in place, transactions can be processed seamlessly, and business-to-business (B2B) and business-to-consumer (B2C) user experiences improve. Businesses are like consumers in that they want better payments experiences, but Ward noted that payments innovation often reaches the B2B space last.

“Consumers and businesses expect immediate interaction associated with their transactions and an integrated experience,” he said. “So, today, when a customer orders a coffee online, they can receive an immediate confirmation that includes the time it will be ready. Businesses need that same type of immediate information that, for example, allows them to track their products in real time, so they know when they will be able to ship to customers.

“However, in the payments space, businesses have historically lagged behind [in innovation]. They are now finding new ways to interact more immediately and with a much more interconnected experience so that when a business makes a payment or receives a payment, it is receiving an immediate confirmation that the transaction was completed.”

Ward said that changes in the way B2B payments are made are essential to acquirers and payments processors looking to provide the frictionless, interconnected experiences that consumers and businesses want. Smart data management not only drives better user experiences and helps companies manage risk, but it also improves the functioning of the digital payments space as a whole.

“Analyzing data and the patterns associated with how customers are transacting provides safety and soundness to the overall financial services ecosystem,” he said. “This data also provides a key safeguard to protect customers and businesses from fraudulent activity. Ultimately, our goal with data is to use it to help our clients make informed decisions about their businesses that they can choose to act on.”

Savvy acquirers seeking to implement day-to-day risk mitigation strategies may see data as just another component in their toolkits. Data is the Swiss Army knife of B2B payments for many of the world’s most successful financial services companies, serving as the foundation of digital innovation while ensuring that transactions, consumers and the overall payments ecosystem remain secure.