The sustained growth of ecommerce has made it easier for cybercriminals to target retailers and more challenging for businesses to protect against the increase in attacks. With the average attempted fraudulent purchase increasing by 69% in 2020, retailers need to prepare for the anticipated surge in fraud that will occur this holiday season.
This preparation starts with having a fraud team in place to set the right strategy, but new data shows that many retailers are falling short. According to a recent survey, fraud prevention responsibilities at retailers range from IT (67%) and operations (53%) to user experience (28%) and sales & marketing (27%), indicating a lack of dedicated ownership and responsibility for fraud prevention. Without a clear owner, these teams tend to focus on their own success metric, which usually has nothing to do with reducing fraud losses.
Let’s look at the steps merchants should follow to build a fraud team that can mitigate attacks and losses—while creating a better customer experience—during the holiday shopping period.
Step one: Building the team
People often misunderstand the purpose of a fraud team. The team’s role spans further than payment fraud and is focused on watching trends, communicating with customers and reviewing orders that require human intelligence to decide. Additionally, once the team mitigates one fraud type, they’re often tasked with other fraud efforts, like combatting account takeovers.
Often, merchants allow other teams—such as IT—to monitor fraud, but they don’t have the relevant expertise or context to address problems completely. The best approach to creating a dedicated fraud department is to hire a team that can focus on specific fraud types. The key is finding people with an array of skills, such as investigation, project management, fluency in scripting languages and more, so they can look at situations from a different point of view. Fraud is never black and white, so having a team from different backgrounds helps build a diverse group of fraud fighters ready for any situation.
Step two: Developing a fraud prevention strategy
Fraud prevention teams can only be as strong as the foundation in place. That’s why companies need to establish a fraud strategy that guides the teams’ decisions. A good plan starts with transitioning from legacy fraud approaches, like blunt, rules-based approaches, to a digital trust and safety strategy.
Today, fraud-fighting is no longer simply loss prevention, payment fraud detection and risk mitigation. Instead, merchants need a method that bakes risk detection into the entire decision-making process and treats customer safety and experience as one—which is where a digital trust and safety strategy comes in.
With this strategy, fraud teams broaden their perspective to streamline the customer experience while blocking fraudulent activity. This focus on stopping fraud is imperative in today’s digital-first environment because fraud prevention directly impacts customer experiences. In fact, 36% of consumers have had a transaction erroneously declined due to suspected fraud which can have a lasting impact on consumer loyalty and trust. This causes consumers to believe that the brands they want to engage with don’t trust them, which causes them to turn to their competitors.
Implementing a digital trust and safety approach gives fraud teams a guide on how to align fraud prevention with the customer experience to ensure they’re fighting fraud while positively impacting the bottom line.
Step three: Cross-department collaboration
Retailers must build fraud prevention into all parts of their organizations. From sales and marketing promotions to new product launches, merchants must ensure that their fraud team has a holistic view of what’s happening across the organization. This starts with creating an open communication channel between fraud and the marketing, sales, and product departments to bake fraud detection into every decision.
Even if it doesn’t seem like a situation the fraud team should be aware of, they must be knowledgeable. Too often, retailers tell fraud teams to reduce losses after a product launch or sale, when it would have been more prudent to take their feedback to create a more secure launch from the start.
These events cause transaction volumes and the number of manual reviews to increase. Giving the team a heads up on a new promotion can ensure the retailer puts a system in place to handle the surge in reviews and doesn’t poorly impact the customer experience.
Ultimately, every department is working towards the same mission, so they must align to mitigate fraud while streamlining the customer experience.
Step four: Your fraud prevention team is only as good as its technology
Fraudsters’ sophisticated tactics aren’t the only thing merchants have dealt with over the past year. Consumer behavior has also changed significantly, making it challenging for merchants to identify a legitimate versus an illegitimate transaction.
This differentiation is essential when you acknowledge that fraudsters constantly develop new ways to attack merchants. With legacy approaches relying on caps on order volumes and values, rules-based strategies can’t account for consumers’ behavioral changes. Relying on static technologies makes it even more challenging for fraud prevention teams to proactively stop fraud independently. So, merchants must have the right technology—like machine learning (ML) systems.
With ML-first fraud prevention technology, fraud teams can spot trends before they become pervasive and proactively prepare for fluctuations. This is because machine learning systems ingest thousands of signals beyond purchase data to detect suspicious activity in real-time without human intervention quickly. By having ML technology in place, fraud teams have the extra support required to proactively identify fraud during high-traffic periods.
With the holiday season quickly approaching, merchants can’t afford to skip the crucial step of putting a fraud team in place. Fraud prevention teams are their first line of defense, and it’s by arming them with the tools they need that allow them to be effective. By following these steps, merchants can ensure they have a top-notch fraud team that’s ready to defend against the surge in fraud that’s inevitable this holiday season.Favorite