Fraud prevention: first typecast as a cost center, now a competitive differentiator

Same role, different characters

In acting, being typecast can both contribute to and limit an actor’s success. The ability to play a specific character type so convincingly well – even if it brings fortune and fame – can make it difficult to be taken seriously for a wider range of roles. Occasionally though, an actor can break a stereotype and achieve success outside of their traditional role.

Hollywood is filled with examples of this, a recent one being Bryan Cranston. Before his masterful portrayal of the sinister Walter White in AMC’s “Breaking Bad”, Cranston was best known as Hal, the dopey father in “Malcolm in the Middle”. There were plenty of other, more prolific actors considered for the role (Christian Slater, Matthew Broderick), but Cranston got the part by delivering a performance in casting that differentiated him from the others, changing millions of viewers’ perception of him along the way.

Starring fraud prevention as cost center

In payments, fraud prevention has been typecast as a cost center, an extra that is necessary to have in the background, but not essential to the plot. Instead, payment gateways and acquirers have assigned the leading role of “competitive differentiator” to strategies like investing in payment technologies to pace the speed and convenience provided by others or integrating robust software solutions that leverage consumer data to support marketing and advertising initiatives. Far from B-rated however, a measurable fraud prevention strategy can steal the spotlight and help gateways and acquirers stand out from the competition and appeal to more merchants. It just needs someone to give it a chance to perform.

The scale of today’s fraud is incomprehensible and combatting something so ubiquitous requires a solution that protects an organisation in real time and across all channels, payments methods and use cases. Neglecting to provide solutions to mitigate this risk increases your merchants’ exposure to unnecessary threats.

Worldpay research found that 79% of merchants admit that the growing proliferation of markets, sales channels and payment methods is making effective fraud prevention difficult. Further, only 20% stated that they are very confident about their ability to manage new fraud threats and half find it difficult to keep up with fraud trends. This is precisely where a smart acquirer can step in and offer a solution to a very large problem. Let’s take a deeper dive into just how challenging that problem is and the remedy that is most effective.

Fraud management shows its value from the backstage

The primary dilemma around fraud management is how to balance your efforts evenly in support of reducing customer friction and keeping fraud rates low. Rapidly rising fraud rates across online and mobile channels is a growing problem and using a brute force approach in response increases the likelihood that genuine transactions will be inaccurately flagged as fraudulent. This results in a decrease in revenue and loss of customers due to a poor experience – not a desirable outcome for any merchant seeking to grow its online presence or competing for mobile app downloads. Add to that the challenge of operational constraints that if left unaddressed, can lead to death by a thousand papercuts. Not to mention the issue of chargeback disputes, which are a notable challenge for anyone without strong domain knowledge and the bandwidth to stay on top of the evolving processes and procedures.

Striking the fraud prevention balance and navigating the nuisance posed by disputes requires a well-engineered system that pairs machine learning and real-time, adaptive behavioural analytics. Then, by integrating into the end-to-end customer journey, this analytics can ingest large, diverse data sets to produce easy-to-understand risk scores.

Opportunely, organised fraudsters are constantly seeking the path of least resistance, but the presence of adaptive behavioural analytics that evolves with rapidly changing fraud trends provides the most consistent and effective line of defense. It distills a complex set of data inputs into individual behavioural profiles and produces actionable insights that help the gateway and acquirer make intelligent decisions in every step throughout the customer journey. When securely deployed and segmented across multiple merchants, this information fosters an environment of shared intelligence, streamlined operations and fraud management that helps merchants drive down fraud rates across all use-cases, while improving the customer experience and promoting operational efficiency. Collectively, this creates a healthier, more profitable merchant portfolio for the payments gateway or acquirer that increases their own business value.

Integrating new payment technology and leveraging consumer data are exciting propositions that will always have a place on the red carpet. But as we’ve seen here, fraud prevention driven by real time behavioural analytics mitigates risk and increases revenue to deliver an incredible performance as a competitive differentiator.

About Dave Excell

Dave is Featurespaces founder and CTO, responsible for working directly with our clients. An experienced technology innovator with over 18 years dedicated to the study of engineering, he has received several accolades in his field, including the ITC Enterprise Award for Young Entrepreneur. Under his leadership, Featurespace has progressed from a concept to a commercial success. Dave currently resides in the U.S. and is managing the company’s global expansion from Atlanta, Georgia.

About Featurespace

Featurespace is a leading provider of Adaptive Behavioral Analytics for fraud and risk management. Deployed in over 180 countries, the ARIC platform uses machine learning to spot anomalies in real time and stop new and known fraud attacks for some of the world’s largest financial institutions, gaming organizations and insurance companies.