By Kim White, Senior Director, Marketing Planning for Fraud and Identity, LexisNexis Risk Solutions
Identity fraud represents a larger share of fraud losses for e-commerce and retail markets in the United States and Canada in 2021 than in previous years. The increase is significant: fraud rose 15 percent from 2019 to 2021.
This upward spiral is not surprising. Most retailers and e-commerce organizations can attest to the evolution of digital-first transactions and payment methods since the beginning of the pandemic. Increasingly and in record numbers, customers have embraced contactless mobile and digital device technology such as mobile apps, payment readers, text to pay, bill-to-mobile, and mobile wallets.
But along with added consumer transaction and payment choices comes a downside: an influx of more complex and sophisticated fraud. Bot accounts and synthetic identities—prevalent in the financial sector—have made their way to the e-commerce and retail sectors, unable to resist the lure of these contactless transactions. While the identity elements may match up with single fraud detection solutions, these tools are no match for today’s enterprising fraudsters.
Fortunately, there is a positive light at the end of the tunnel.
Merchants that invest in best practices by tailoring the customer experience across the different customer journeys recognize a significant reduction in fraud while solidifying the customer experience. Organizations that commit to utilizing more than one solution and matching them to the most appropriate transaction type are most likely to achieve success. And this is particularly imperative at three customer touchpoints: account creation, log-in, and transaction.
Account creation represents an opportunity that is too often overlooked. Within this simple process of inputting personal data lies valuable information that retailers and e-commerce organizations can leverage to approve more customers. By pushing fraud tools further up in the process—at account creation—an organization is well-positioned to capture intelligence that provides early positive signals about whether the customer is real—or a synthetic identity.
When merchants leverage appropriate passive fraud tools, they can be alerted to the potential for fraud right from the start.
The tools reveal answers to questions like these: Is there anything suspicious about the device that the customer is using for account creation? Is the customer a human or a bot? Do the identity elements being entered go together? Is the email from a non-recognizable domain?
By incorporating various signals and integrating cybersecurity at account creation, when customers log in for the first time, they can be welcomed as return customers. As such, customers can anticipate going through the progression of adding items to the cart, saving or entering in payment details, and checking out in a fast and functional way. The goal is to enable consumers to quickly purchase products or services without added friction.
Once the customer transacts, automated multi-layered fraud tools can evaluate whether or not to ramp up authentication. If the customer is transacting in a consistent manner with past visits, there is less of a need to add friction at the transaction stage. But if, for example, the customer is purchasing a high-cost item that doesn’t fit their normal purchasing profile and then wants to change the shipping address, another layer of authentication may be added to help guard against loss.
The possibilities of balancing risk vs. friction with robust multi-layered tools lead directly to greater profitability and customer experience along the customer journey.
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