Preventing fraud without compromising the customer experience

Delivering a great shopping experience is about more than just the shopping, it's about the paying too. However, today merchants are so hyper-focused on the risk of fraud and attacks, the ease of checkout often suffers, leaving customers frustrated and carts abandoned.  Rigorous risk mitigation tools can cause friction in the payment process. Multiple security and authentication steps, low tolerance rules, and cumbersome hurdles are triggering an increase in false declines, with legitimate card-not-present (CNP) transactions rejected due to a suspicion of fraud. On the other hand, relaxing fraud prevention measures to make way for a seamless shopping experience can open up merchants to the significant risk of undetected fraudulent transactions and increase in chargebacks.

According to Paysafe’s Lost in Transaction research report, 51% of consumers reported that they would accept whatever security measures were required if it kept their data secure however poor it made the user experience. However, a 2021 Global Identity and Fraud Report by Experian discovered that consumers reported that they would abandon a transaction if they had to wait too long.

So how can merchants meet these seemingly conflicting consumer demands? Sadly, merchants are caught between a rock and a hard place and are forced to make a difficult decision. One option leads to effective fraud prevention, but unhappy customers (and lost revenue) due to strict security protocols. The second choice results in happy customers, but increases the likelihood of fraudulent transactions and losses.

In a study conducted by PwC, American consumers said the total shopping experience influences 75% of their decision to complete a purchase. Tension caused by fraud prevention takes away from the customer experience, and consequently negatively impacts revenue. Keeping a balance between the two options is key, and today’s merchants are lucky to operate in an era where technology makes it possible to strike an effective balance between minimizing fraud and maximizing customer satisfaction. 

The following three tips can help companies balance strong payment fraud prevention while providing an exceptional shopping experience.

Communication is key, especially between risk creators and risk mitigators

As online shopping continues to rise, fraudsters are eager to take advantage of vulnerabilities in online security. In particular, there are certain departments within an e-commerce organization that can make the business more vulnerable to fraud. For example, the marketing and sales departments. In an effort to create stronger brand equity, the team may implement tactics that create small holes in the business’ security, such as issuing discount coupons. As a result, the fraud team may submit all coupon entries for manual review, which in turn could damage the customer experience. Employees in fraud-prone areas of a business should be aware of the warning signs of fraud, develop prevention skills and have a seamless process to report questionable behavior. It’s important to make sure that all departments are collaborating effectively and are in constant communication to reduce risk as much as possible. 

Leverage solutions that combine dynamic risk management and payment processing

Choosing solutions that allow you to combine the risk management tools within your payment processing platform helps create a seamless and fraud-free payment experience for your customers. A dynamic risk management database that leverages millions of customer profiles and machine learning enables you to accurately distinguish fraudulent from legitimate transactions in seconds. Machine learning has become a key pillar in the fraud detection process, and every e-commerce company should be using it to their full advantage. Deploying a machine learning-based solution that prevents fraud while maximizing approvals of legitimate transactions can deliver a high-quality shopping experience without sacrificing security. 

Truth in trends, power in learning

It is essential that merchants label all card-not-present (CNP) orders that are approved and rejected and commit to diving deeper into these transactional decisions to see why a particular transaction was approved or rejected. This labelling allows merchants to establish trends and patterns in the orders that were incorrectly decided. For example, they might find that orders with several of the same items are routinely declined even though they’re later found to be legitimate. When digging deeper into these orders, you might find that the legitimate orders are the ones that have several of the same item but possibly in different sizes or colors, and really just reflect consumer indecision rather than a fraudster. Merchants can use these trends and patterns to create "shopping stories" that they can then use to dynamically adjust their fraud parameters. 

Effective payment fraud prevention and excellent customer experience have long been at the opposite poles of the e-commerce spectrum. Today, with new technologies rooted in machine learning, a change in mindset, and an adjustment in their processes and systems, e-commerce businesses can prevent losses due to payment fraud, maximize revenue, and keep their customers loyal and happy.