How to Manage Payment Risk and Fraud in 2022 – Services – Software
Covid-19 has forever changed the way consumers shop, creating a strong desire for digital payments and the rapid shift to e-commerce.
Recent data from Australia Post marked November 2021 as the biggest month in Australian online shopping history, a significant jump with a 13% increase in online retail compared to November 2020 and 76% compared to November 2019.
With Australians spending most of 2021 in lockdown, it’s no surprise that online shopping has exploded over Christmas. But while the holidays are a time for celebrations, they are also a time when shoppers need to be alert. Such occurrences are often marred by fraud and scams, with cybercriminals taking advantage of increased spending by the average consumer. This was reflected by data from ScamWatch reporting that Australian shoppers lost an estimated $14 million over the Christmas period in November and December, making them the most profitable months for scammers.
The costly impact of fraud
According to the Australian Payments Network (APN), while the number of people victimized by card fraud remained relatively stable in 2020, increasing only 0.6% to $467.6 million, card fraud absent (CNP) increased by 3.8%. This means that in 2020 alone, Australians lost $418.9 million to CNP fraud and that number is set to rise.
CNP fraud typically occurs online, when a fraudster uses hacked card information to make a purchase remotely. The decline in face-to-face transactions since the start of the pandemic has resulted in CNP fraud accounting for almost 90% of all Australian card fraud.
The rapid growth of e-commerce in Australia comes with its own set of consequences, as the number of scams directed at online shoppers is also on the rise. According to ScamWatch, the average number of purchase scams in Australia in 2021 has increased by 40% compared to 2020, with the number now standing at 5,108 cases per month.
The APN also found that CNP fraud in Australian online businesses increased from 73% in 2019 to 79% in 2020. This means businesses lost $265 million due to CNP fraud alone in 2020. We have seen that online fraud affects both consumers and businesses. in the e-commerce industry. This means retailers need to tread carefully and take the necessary steps to secure the growing digital payments infrastructure.
Taming payment fraud in 2022
According to a report by credit reporting agency Equifax, businesses are looking to increase their investment in digital verification products in 2021, with 42% saying they are doing so to improve customer transaction completion rates and 42% saying that they want to increase levels of trust between customers. Here are the steps businesses can take to navigate and minimize payment risk in 2022:
1. Understand buyer behavior
Who is shopping with you? Companies are in the best position to use risk-based authentication tools that can identify serial fraudsters. To reduce fraud, businesses need a holistic view of their customers’ behavior, from browsing habits to payment. Behavioral analysis technology plays a key role in identifying checkout fraud attempts. For example, the use of AI-powered technology embedded in risk management tools links bundled transactions to identify a buyer’s profile even when they switch devices, networks and identities.
2. Use both human and machine learning capabilities
Although fraud detection is seen as an automated process, a human component is still needed to detect complex behavior that does not conform to a pattern. A rules-based system is a perfect example. As a rules-based system, businesses retain complete control and visibility into how risk decisions are made while benefiting from machine learning-based optimization.
Risk management tools can be completely omnichannel, with the power to provide a single view of all buyers and fraudsters, ensuring companies have maximum transparency and control over their risk management strategies.
3. Invest in tokenization
CNP fraud can also be prevented through tokenization. Tokenization ensures that customers’ card details are secure and protected as they are replaced with unique digital information, otherwise known as a “token”. Creating a token prevents misuse of card information and allows businesses to securely store one or more payment details per buyer, enabling offers of subscription payments, automatic top-ups on accounts buyers and a faster checkout experience.
When it comes to e-commerce fraud, attacks come in many shapes and sizes. What they have in common is competence and preparation, the better prepared you are and the quicker you can react, the less risk you and your clients will face.
Hayley Fisher is Country Director of AUNZ, Adyen.