By Ran Wasserman, CTO, SecuredTouch - Sponsored Content
With more retailers than ever before embracing e-commerce, the fraud journey is becoming a focus for many. It is clear, though, why retailers have paid more attention to the customer journey. After all, in addition to shaping a customer’s overall experience, a customer’s journey determines whether or not they will make a repeat purchase. Too often, however, when focusing solely on the customer journey, the fraudster’s journey remains overlooked. To bring the fraud journey into focus, we need to understand what it really is and where retailers should be placing their efforts.
Like the customer journey, the fraud journey is the path fraudsters take when interacting with a brand. In the case of the fraud journey, we consider the actions a fraudster takes to commit fraud. Understanding the fraud journey and focusing on the fraudster’s actions will enable online retailers to dramatically reduce fraud conversion rates and ultimately prevent fraud.
It’s not by chance that the customer’s journey and the fraudster’s journey are often mentioned together. In their attempt to satisfy customers while also detecting and preventing fraud, many retailers are faced with an impossible juggling act: Do I prevent fraud or give my customers the experience they want? True, balancing between the two, enabling the paths to co-exist, is challenging, yet it can be achieved. Taking the time to understand the intricacies of the fraud journey can help reduce false positives and cut down on chargebacks.
The True Cost of Chargebacks
Chargebacks. The very word sends shivers down the spine of even the most experienced online retail fraud fighters—with good reason. Chargebacks end up costing retailers in additional fees as well as in customer dissatisfaction and it’s nearly impossible to truly evaluate the cost of chargebacks.
It’s estimated that for every $100 in chargebacks, retailers end up paying $240! But the problem with chargebacks goes far beyond any fees or penalties incurred. The issue with chargebacks is that if a customer gets to the point where they have to request a chargeback, the damage has already been done.
Why Does the Fraud Journey Matter?
Let’s consider the forecast that e-commerce is expected to make up 22 percent of all global retail sales by 2023. Or that it’s predicted that U.S. e-commerce sales will jump 18 percent due to Covid-19. E-commerce sales are at an all-time high, and there are no signs this trend is going to slow down anytime soon. This emphasizes even more the need to focus on the fraud journey. The fraud journey has an impact when building an effective chargeback management strategy and it is directly linked to customer retention and acquisition.
The fraud journey gives one an in-depth understanding of users who could be fraudsters, based on suspicious behavior. Retailers looking to up their fraud prevention and chargeback management game, need to have a clear understanding of the fraud journey. This understanding will make it easy for them to differentiate actions a legitimate user would take, from fraudulent actions. For example, a change of the shipping address upon login indicates a possible fraudulent action. Carefully considering the behavior of a legitimate customer at every stage of the customer journey can help isolate suspicious activities with more accuracy, and thus cut down on false positives.
Fraud Prevention: The Ultimate Juggling Act
Understanding chargebacks and how to prevent them, starts with understanding how retailers approach fraud prevention. In cases where retailers focus on detection and prevention at the payment stage, or even only one part of the payment stage, fraudsters are able to successfully move through their journey undetected until it is too late.
If a fraudster’s activity is detected as suspicious and flagged only at the payment stage, gives an opportunistic fraudster plenty of opportunities to monetize the service by other means before their presence is detected. This could include everything from promo abuse and referral abuse to new account fraud.
That’s exactly why a more advanced fraud prevention and detection approach is required. For example, using technologies such as behavioral biometrics will enable retailers to stop a fraudster long before the payment stage, before any real damage is done, and will help cut down on chargebacks.
Is it really that simple? Retailers are rightfully concerned with the need to ensure that detection of fraud early in the fraud journey, early enough to prevent damage including chargebacks, will introduce as little friction as possible into the customer’s journey. At times it seems retailers can’t win. If they flag an activity as suspicious based on strict rules, they might find themselves with a rise in false positives and possibly disappointed legitimate customers. Other times retailers rely on fraud detection and prevention at the payment stage, ignoring any fraudulent activity, which happens before that, throughout the customer journey. Either way, with fraudulent activities getting more sophisticated, retailers are dealing with a growing number of chargebacks due to fraud.
In-depth understanding of the fraud journey, identifying and monitoring its various touchpoints, will help retailers to reduce fraud and still maintain the balance between customer satisfaction and security.
Proactive Chargeback Management
The common passive-reactive approach to chargeback management is proving to be insufficient as fraudsters are increasingly using tools such as bots and emulators to scale their attacks. Behavioral biometrics-based fraud detection introduces a proactive approach to counter advanced fraud. As opposed to focusing on login or checkout only, and reacting too late, behavioral biometrics focuses on user behavior throughout the entire customer journey, making it easy to identify suspicious and potentially fraudulent behavior at its earliest stage, enabling to stop the fraudster in his tracks, before damage is done.
Adopting advanced technologies like behavioral biometrics will provide retailers with visibility and insight into the entire fraud journey, leading to better, data-driven decision making, pre-transaction prevention and cut down chargebacks.
SecuredTouch is the expert in adaptive fraud detection solutions for online retailers and financial institutions. Using machine learning, the technology continuously analyzes hundreds of behavioral data points to differentiate between human and non-human behaviors, human to device interactions and behavioral anomalies to provide early detection of fraud. The solution identifies sophisticated fraud throughout the customer journey while simultaneously improving the user experience. Businesses benefit from reduced drain on internal resources and increased transaction rates, ultimately leading to an improved bottom line. Today, our award-winning solutions are used by some of the world's largest retailers and financial institutions.