As fraudsters utilize new strategies to take advantage of businesses and consumers alike, merchants have seen a rise in fraud volume. Payments technology is also evolving to assist improve the customer experience and prevent fraud, but only as long as the data and access of customers remains safe. They must keep a close eye on the three categories below and take efforts to limit the risks:
How PSD2 Will Affect Your Business And How To Prepare For It.
PSD2, the European Union’s most recent digital payments policy, aims to decrease fraud and foster open financial innovation. It is one of the most active advancements in payments, and it has a number of implications for merchants. On the one hand, it offers the ability to lower the risk of fraud for merchants. On the other hand, the new requirement necessitates additional consumer authentication, which might slow down the checkout process and lead to cart abandonment.
Merchants in the European Economic Area and merchants outside the EEA who process local payments inside must comply with PSD2’s Strong Customer Authentication (SCA) requirements. That means that a customer must either validate their identity in two ways to complete a transaction or grant authorization in advance for purchases from trusted merchants. The UK will require SCA in September 2021.
Due to concerns about increased friction and cart abandonment, merchants and fintech companies are looking into the preauthorization aspect of SCA, which allows customers to “delegate SCA to a merchant or wallet” and shop without having to satisfy two-factor authentication requirements for each order.
Higher-Value Fraud Attacks
Every case of accomplished fraud results in a loss for the merchant, but the stakes are larger with bigger ticket values. As e-commerce expands, retailers will need a strategy for managing increased order volume while avoiding rejecting good customers.
What merchants can do now: Examine your store’s fraud data patterns to check if fraud order amounts have increased. If that’s the case, you can tweak your automatic fraud detection criteria to focus more on orders in the range where you’re seeing the most attempted and completed fraud.
However, automated rules should not be relied upon. If your store rejects all flagged orders automatically, you’re probably turning away potential customers. According to a Sapio Research for ClearSale survey of online buyers in five countries conducted in March 2020, 39 percent will not buy from a store that declines their order again, and 28 percent will post about their experience on social media.
Manually reviewing all flagged orders is a better technique in terms of client retention and fraud detection. This ensures that legitimate orders are processed, and your fraud program’s AI can learn to distinguish between fraud and legitimate customer behavior.
Fraudulent Chargebacks
Since March 2020, many shops have observed an increase in chargebacks. This corresponds to a rise in the number of consumers who admit to defrauding internet shops by saying they never received things they ordered. According to one survey, one-third of American and British consumers have made a bogus chargeback since the outbreak began.
What merchants can do now: Customers may track their packages from beginning to end, arrange delivery for when they are at home, and receive visual evidence of delivery—usually in the form of a photo taken by the driver. Implementing this documentation improves the consumer experience and assists merchants in more effectively fighting chargebacks, which can deter fraudsters and encourage them to move on.