One step ahead: Balancing fraud and customer experience

Maija Levasalmi, Risk Manager, Adyen UK
By Maija Levasalmi, Risk Manager, Adyen UK

Fraud is all too common and can do significant harm to businesses if left unchecked. In fact, 71 per cent of organisations were victims of payment fraud attacks and attempts in 2021, according to the 2022 AFP Payments Fraud and Control survey. Unfortunately, some businesses don’t have the right defences in place; 42 per cent state that fraud attempts increased over the last 12 months. In a worst-case scenario, a business can suffer financial loss, a hit to its reputation, and a breakdown of trust between its partners and customers.

As a business grows, so too does the complexity of its networks and partnerships, increasing its exposure points and the threat of fraud. This makes staying one step ahead of fraudsters more important than ever. The good news is that, while fraudsters’ methods are constantly evolving, so too is the technology designed to prevent it, helping to defend businesses from increasingly sophisticated attacks. Ensuring there are in-built risk management systems and enhanced authentication systems will keep you ahead of the curve.

Protecting customer relationships

With the threat of fraud looming large, it’s tempting to prioritise security above other factors. But, when it comes to payments, this can be at the expense of the customer experience; as soon as something stands out from ‘normal’ behaviour, a transaction gets blocked. This might reduce incidences of fraud, but genuine customers can get caught up in the web of defences, leading to lost sales and damaged relationships.

Fraudsters are increasingly using data for their attacks; businesses must do the same. Fraud detection technology helps differentiate between genuine customers and fraudsters. It uses huge data sets of historical information to identify suspicious activity while letting genuine customers proceed unhindered.

Gathering the evidence

There are many types of payment fraud. It can come in the form of credit card fraud, gift card fraud, card testing, friendly fraud, or chargeback fraud. So, it’s important to tailor risk management systems and adjust defences accordingly.

Leveraging data to make a better-informed decision is the first step to making fraud management systems effective. Fraudsters’ tactics are ever-changing so it’s essential to review risk profiles regularly. Look at the case of friendly fraud, for example: when a  shopper initiates a chargeback on an item they’ve already received. In this situation, risk systems that can spot patterns such as serial fraudsters that claim money back using different identities is a powerful tool in your armoury.

Fraudsters are clever and will use loopholes in flawed risk systems to their advantage. As a business, learning from past mistakes is just as essential as detecting new fraud patterns. Regularly assessing risk reports, identifying patterns, and checking the balance between acceptance rates and decline rates helps spot the warning signs.

Businesses that make use of in-built risk management systems will benefit from trend data from across a whole platform. This helps detect and mitigate fraud, as well as assisting in handling disputes and chargebacks. Adyen created a risk management product called RevenueProtect, which has a range of tools to tackle fraud. Using a global, cross-industry network of data to accurately make the best risk decisions, it takes the latest trends into account in order to combat fraud effectively and efficiently. There’s no single solution to fraud, which is why risk management systems must take multiple factors into consideration.

The right balance

Strong customer authentication (SCA) plays an important role in preventing fraudulent activity and it’s critical to stay up to date with the latest mandates to avoid getting caught out. Our latest research found that 13 per cent of UK retailers still do not have a solution in place to provide SCA. Without this, businesses are vulnerable since they lose the benefit of a liability shift. Many SCA checks can be completed in the background while the customer completes the transaction, meaning there is no friction to the customer experience. Identity fraud grew by 22 per cent (226,000) in 2021, further highlighting the need for fool-proof security measures. Tackling this challenge requires innovation. Adyen’s authentication system takes different market and issuer preferences into account, adjusting in real-time to authenticate without adding unnecessary friction.

The key is finding the right balance between delivering a seamless transaction while having a high-security system.

Ultimately, it’s important to reassess your procedures and make sure they are foolproof. Risk management systems can help with this, making the most of large historical data sets to accurately model better decisions for combating fraud. This does not have to be a tiresome task; let technology do the work.


Twitter Facebook LinkedIn WhatsApp

Related Articles

Sign up to receive our newsletter