“Fraudsters are tricky, and fraudsters are fast. But for merchants, the fraud management battle is a winnable one.” So says Andreas Suma, Global Leader, Fraud and Data at ACI Worldwide (a large application software firm specialized in the electronic payments industry).
Mr. Suma focuses his views on shattering data silos that exist within businesses, saying consolidated complete data leads to the best merchant battle plan against fraud.
Because when silos disappear, the power of “big data” effectively turns business information into fraud prevention data — available for harvest to combat fraud.
Many global consulting firms also tout the use of big data to inform aspects of business operations — cyber security being a critical one.
Anton Chuvakin, Research VP with Gartner consulting firm’s Risk Management Group, advises that businesses should start by asking questions about the data they have, not the data they want.
“Let’s go into our data and see what is up, then create analytic approaches to detect and investigate it.”
That’s fine and dandy — maybe even very useful — for big banks and other large businesses. They dedicate hefty budgets to fighting fraud. But what about the average high risk ecommerce merchant… What’s he to do about finding useful fraud prevention data in his files?
Let’s hope you’ve been keeping business records — including the rich data you gather with each sale — in a secure, easily accessed location. (Of course you have.) Now let’s look at what you can do to transform it into fraud prevention data for your business.
Business Data Helps Identify — and Stop — the Bad Guys
Data that flows at lightning speed swamp online merchants of all sizes. And such data offers clues that can help merchants separate the good actors from the bad. How, you might ask.
First of all, you need to know where to find the data you have. You know, like transaction data, chargeback data, customer data (including from customer loyalty programs), and customer service data. There may be much more available than you’d expect, once you find it.
And then you need to know what to do with the data you catalog. Of course that’s easy to say, but harder to do.
Keep in mind that your goals include limiting or reducing fraud while also driving up conversions. Achieving both will impact business results in a very positive way, driving up both revenues and profits.
Payments Data Delivers Value
Merchants should recognize that there’s value in the thousands of transactions logged through their payments provider.
What you’ll need to manipulate and learn from the data is a systematic data analytics approach. Pull it all together into meaningful, actionable fraud prevention data — when combined with human scrutiny and decision-making.
For ecommerce merchants concerned with fraud prevention, data analytics translates to fraud prevention tools. Key features to look for when choosing such a tool for your business include a combination of:
- Predictive analytics (intelligent software),
- Automated fraud detection algorithms developed by expert fraud analysts using global data (because threats to your ecommerce business may start in remote places around the world), and
- A full fraud reporting tool set that combines data management with fast reporting to allow speedy visual monitoring by merchants.
The expected result? Reduced fraud and improved conversion rates through lower false positives — thereby improving your bottom line.
Better Understand Your Customer Base
Financial institutions and successful merchants today embrace the omnichannel customer view through which they attempt to see customers holistically, with a 360-degree outlook.
Viewing the available data in an integrated fashion is one way to develop a better understanding of your customer base. Enter big data solutions and emerging technologies to handle the data analysis.
As Mr. Suma also noted in his recent discussion with PYMNTS.com, “One size fits all is not a legitimate (fraud management) strategy. You need to be able to tune it and adapt it to multiple channels and different geographies.”
Because your customers reside anywhere in the world supported by your business model.
What Does the Future Hold For Fraud Prevention Data?
With ecommerce changing dramatically the nature of retail around the world, there’s a proliferation of new marketing channels, payment methods, and international customer segments to monitor.
The amount of data generated and captured through online sales over-burdens merchants’ existing (human) decision-making processes. They’ve been stretched and pulled so much that fraudsters often find openings in fraud defenses, and do their worst.
Emerging technologies like machine learning come to the rescue for merchants wanting to harvest big fraud prevention data.
According to experts like Feedzai’s CEO Nuno Sebastiao on a recent podcast: “The promise of machine learning is the ability to digest all of that information and still make sense of it once you determine what you’re looking for, i.e., your business goals.”
Machine learning tools to combat fraud exist today, and are being used by some big companies with large fraud-fighting budgets. The algorithms imbedded in the tools — and price points — will only improve over time.
Conclusion
When all is said and done, fraud prevention data and machine learning applications to combat payments industry fraud go hand-in-hand.
In reality, such solutions sill reside “on the cusp” for most ecommerce businesses. But technological solutions in the payments space evolve quickly and it behooves ecommerce merchants to watch this space.
Even if you don’t feel that you have the bandwidth to stay abreast of emerging technologies, solutions exist. One of the best ways merchants stay afloat in the ongoing battle against fraud involves partnering with a payments processor who understands your business.
Choose one who will act as your payments advisor and consultant too. That of course requires real payment industry expertise, and a desire to help your online business prosper and grow.
The right partner will stick around to see you succeed… while helping you get over the data hump and other obstacles in the fight against fraud. Because that’s what good business partners do.