By Rei Carvalho, CEO, Emailage
The world of shipments is unrecognizable from just a few short years ago. The average time between purchase and delivery has plummeted from weeks to a matter of days or less, depending on the distance. Same-day delivery from sites like Amazon, in-store pickup, mobile devices, and digital downloads make it possible to get products into shoppers’ hands more rapidly than ever before, and their expectations have soared accordingly. Instant gratification has become the norm.
As a result, the world’s most powerful companies and small startups alike are racing to achieve the fastest purchase-to-delivery time. In these “Door-to-Door Wars,” whoever is fastest wins. Speed is a core part of attracting and keeping customers, so companies build in huge amounts of automation to fulfill orders as quickly as possible. But while speed is essential, so is security. Fraud results in nearly $25 billion of financial losses a year. Balancing the need to provide a seamless, expedited shopping experience while also protecting from security threats can present a challenge for merchants. Security breaches are a sure way to lose customers; however, fraud prevention tools could be slowing down turnaround time.
The on-demand economy requires merchants to find tools that prevent fraud losses without impacting the buying experience. Here are six things businesses should consider when selecting fraud prevention technologies in today’s on-demand economy.
Advertisement
1. Provide Real-Time Analysis. Security threats are constantly evolving and getting more sophisticated, which means getting immediate risk results is imperative to preventing fraud. Some fraud prevention tools analyze transaction data in a batch mode after an order has already been placed. This is sufficient with some order processing systems, but when fast delivery times are critical, so are faster risk assessments. Merchants need tools that work at their pace and provide immediate data in order to approve sales quickly and prevent fraud before it actually happens.
2. Include Insights Beyond Transaction Data. Fraud prevention tools that only analyze standard transaction data, such as name or address, are easily tricked by fraudsters who use stolen IDs. Effective fraud prevention tools go beyond this basic comparative information by building a complete picture based on the reputation of the buyer, factoring in unique global identifiers such as their email address, IP and other information to validate identity, no matter where the buyer is geographically. Using a combination of transactional and non-transactional data, as well as the correlation of the two datasets, give merchants additional risk information with which to make more educated, faster decisions.
3. Be Effective Internationally. E-Commerce is skyrocketing in developing markets. Growth increases exponentially every year and merchants are responding to these huge opportunities. However, fraud is a major concern for merchants conducting business in emerging markets. An Ernst and Young survey found that the global fraud risks that businesses face are not getting any better. As these markets continue to expand, so must fraud technologies.
These risks are further complicated by the fact that the fraud landscape in every country is different. For example, fraud and risk to fraud has dramatically increased in Mexico over the past few years due to high staff turnover and growing IT complexity; whereas in China increased prevalence of outsourcing, vendor/supplier/procurement fraud, and regulatory and compliance breaches are the higher risks. Therefore, fraud prevention tools that are geared towards using country-specific data sources may have trouble being effective worldwide. Successful fraud prevention tools will be able to use data sources that resonate globally, such as email addresses.
And what to do when you are a local company selling to customer from abroad? If you are using Phone or Address based algorithms to certify that he is who he said he is it wouldn’t be sufficient. These data elements will not give you the necessary comfort level you are seeking because they are subjective in its essence and almost impossible to validate against a reliable source.
4. Leverage Big Data. Big Data is revolutionizing fraud detection by searching through large amounts of structured and unstructured data for known bad IP addresses, anomalies in customer behavior, unusual login times, etc. that detect fraud in real-time. Equally as important, Big Data also enables fraud prevention technologies to look beyond a single transaction and identify trends. These trends provide greater visibility into the evolving fraud landscape and how fraudsters are trying to overcome prevention tools, which gives both fraud prevention companies and merchants insight on how to stop fraud before it happens. The best defense is offense.
5. Create A Frictionless Buying Experience. There are so many variables that go into deploying a fraud prevention solution that is effective in today’s on-demand economy. Perhaps the greatest challenge is making sure that the technology does not disrupt the shopping experience. Every extra web page, request for data entry, and identity verification step raises the likelihood that a shopper will abandon their cart. More friction leads to lower sales conversions, which means merchants need fraud prevention tools that are invisible. Effective fraud prevention tools avoid additional authentication questions and steps. Instead, they give merchants the tools they need to make quick and informed fraud decisions without requiring user interaction.
6. Be Adaptable To Multiple Payment Methods. Consumers have a multitude of payment methods at their fingertips and more seem to arise every day. Merchants have to accommodate as many of these methods as they can in order to maximize transactions and conversion rates and minimize cart abandonment. As payment methods continue to diversify, fraud prevention tools also need to embrace this diversity. The best fraud prevention tools should be able to work with any kind of payment method and have tools to help verify identities, regardless of how a transaction was paid. The most effective tools leverage very little transactional data, in order to minimize risk without relying on a certain type of payment method.
A seamless and secure online experience is absolutely essential to conducting business today. Historically, these have seemed like mutually exclusive characteristics, but that is no longer the case. Advancements in fraud prevention, identity authentication, and Big Data are making it possible to deliver security without compromising the user experience. The best solutions take advantage of the wealth of information that is already available on the Internet to be proactive and invisible about keeping fraudsters at bay.
What strategies have you found for preventing fraud without affecting the consumer experience? Share your thoughts in the comments section below.
Rei Carvalho is the CEO and founder of Emailage, an innovative company that leverages email addresses to identify fraud trends across industries and regions, and was recently named to of Forbes’ list of America’s Most Promising Companies. Rei brings over a decade of C-level executive leadership experience and has worked with industry giants such as Cisco, AT&T, the U.S. Navy and more.
