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Is the Fear of Fraud Leading to Loss of Sales? AI Can Help.

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Fraud has plagued retailers for quite some time, but the issue is now getting its time in the spotlight due to the increased use of AI within the industry, as well as consumers’ general awareness of the trend. In fact, a recent survey found that 87% of consumers are concerned about identity theft or fraud – a 24% increase from 2023 findings, when only 63% of consumers reported feeling this same type of concern.

As a result, security and privacy are quickly topping the list of consumer preferences when interacting with brands, ranking right up there with convenience and ease of use. How can retailers ensure their digital experiences are meeting these evolving, heightened expectations? The answer may lie in artificial intelligence (AI).

1. Facing the Fear of AI

AI can feel complex and overwhelming; some retailers may even believe it can lead to sales loss. But it’s important to separate fact from fiction, or truth from what you perceive to be true. The first step in helping to prevent retail fraud, while fortifying the digital experience, is actually to face the fear of AI head-on and embrace the power of this emerging technology.

Major and notable ecommerce retailers have adopted AI and machine learning algorithms to monitor transactions, detect fraudulent activity and protect against counterfeit goods. Typically how this works is AI that analyzes massive amounts of data and signals an alarm if any unusual patterns are found, often indicating fraud. Think of it as finding the needle in the haystack that most humans would miss.

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For most retailers, these major brands are setting the standard for the future of AI use – but there are gradual ways to begin implementing AI into your fraud prevention strategy now, versus later when it’s far too late.

2. Ditching the Traditional Password

We’ve all heard of the problems traditional passwords can bring. In addition to massive headaches, they pose a major security risk and are challenging to remember, equating to frustrated customers and loss of sales. In fact, 89% of consumers have complaints about keeping track of their passwords and 54% have stopped using an account or online service because they became frustrated when trying to log in.

Don’t let your brand be the next frustration. Ditch the traditional, outdated password by embracing passwordless authentication. Going passwordless can look different for various brands, but a recommended, gradual and consumer-friendly approach would be to adopt biometric logins such as face IDs, fingerprints and/or selfie verification.

On the backend, AI algorithms analyze biometric data to verify a user’s identity, so consumers can rest assured they are the intended person logging into their ecommerce accounts – instead of fraudsters. This is a more straightforward use case for AI implementation, and one that consumers have come to know and crave.

3. Putting Control in Consumers’ Hands with Digital IDs

Speaking of crave, consumers also desire greater control over their data. One way to unlock this is through embracing a decentralized identity strategy. Decentralized identity may seem like a future pipe dream, but brands can begin to raise awareness of it and adopt elements of digital IDs now versus later. The first component of a decentralized identity strategy is educating customers, as recent research found only 35% of consumers are at least somewhat familiar with the concept.

Decentralized identity eliminates the need for users to provide unnecessary amounts of personal information in order to access a service. For example, do you really need to hand over your driver’s license, which includes your home address, height, weight, eye color and more, just to prove your age?

Here’s how it works: Organizations issue users a verifiable digital credential that is stored in a digital wallet. Users present their credentials to organizations that can verify the information instantly without having to contact the issuer. While this may seem futuristic in nature, some major brands and several Departments of Motor Vehicles (DMVs) within the U.S. have seen major success with such an approach.

Digital IDs put power back in the hands of consumers. During a time when they’re demanding greater security and privacy amid the AI boom, this is a viable long-term strategy to consider planning for now.

The reality is that fraud isn’t going away. In fact, account fraud is only getting more brazen; attempted fraud transactions increased 92% and attempted fraud amounts jumped 146% year-over-year. With the proliferation of AI within retail, organizations are only anticipating fraud to worsen – but AI can be a friend, as much as it’s considered a foe. It’s up to retailers to abate their fears and embrace the emerging technology, or risk getting beaten out by fraudsters, and ultimately, the competition.


Darryl Jones is a technology executive with 20 years of experience driving software solutions in the technology space. He is passionate about delivering products that delight users and provide a sustainable competitive advantage in a complex global marketplace. At Ping Identity, Jones is VP, Consumer Strategy, and leads the Consumer Identity and Access Management (CIAM) solution.

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