When one stops to consider how fast merchants pivoted to offer their consumers digitally-enriched shopping journeys and how many things customers can do now that they couldn’t as recently as January, it’s pretty staggering.
That would be terrific news, Kount Chief Customer Experience Officer Rich Stuppy told PYMNTS in an interview, except for one thing: fraudsters love seeing consumer-centric innovations because those present fresh access points for ill-gotten gains.
“Unfortunately, many of the same things that create tremendously valuable brand experiences are also tremendously valuable for fraudsters,” he said.
For example, Stuppy said advanced loyalty programs that allow customers to convert loyalty points to gift cards or transfer them to family or friends “are dream setups for a fraudster.”
But he added that fighting fraud isn’t about building the highest possible wall. After all, fraudsters will always find a way to build a ladder, and firms that impose too-onerous security run the risk of losing legitimate consumers by adding excess friction to the process.
“You have to … balance the customer experience you’re trying to provide for your good customers [with] an understanding about what the fraudsters will do and how they will use your own powers against you,” he said.
The goal is to build a wall more intelligently so that the good guys can get through easily even as you lock the bad guys out.
Securing A Tempting Target Field
The best way to stop fraud is to look at the consumer journey more holistically and figure out how to best scale protection in places where fraudsters tend to congregate.
Merchants’ goals are simple, Stuppy said. First, find a way to invisibly let the best customers through with no friction. Second, address some use cases where the situation looks more questionable, and third, stop the out-and-out fraudsters before they can even enter the system.
But he added that while those goals are simple in theory, they’re tough to actually execute. Doing so requires firms to think very differently about how they build the consumer experience from the ground up.
He said companies must “bring together the product people that are building the brand interactions inside the mobile app or inside the web presence and have them [ask]: ‘Where are the points that a fraud risk and loss can occur?’”
But the problem is that “many times, the product people that are responsible for building these amazing brand experiences don’t have that knowledge or that fraud mindset,” he said.
That’s where a company’s loss prevention staff “can add a ton of value to their brand by getting [product people] to stop thinking for a second about what they are doing for the customer and instead think about what a malicious person is going to do inside this brand experience that you’re creating,” Stuppy said.
Kount’s Identity Trust Global Network is built over 32 billion annual interactions globally and can also help businesses because it essentially gives firms the ability to step back and “follow the bouncing fraud ball” as it moves across verticals, he said.
“If you look at the sophisticated rings, we see literally hundreds of thousands of attacks and attempts across multiple different types of businesses happening,” Stuppy said. “And we can literally track them as they happen in real time and attempt to stop them. But just to see how they’re probing and trying and attacking here, and then probing and trying and attacking there — the size, sophistication and speed, I’m always shocked at how much faster it is going and how much more there always is.”
That’s why it’s critical to rely on a robust data network linked by artificial intelligence (AI). One merchant alone would have limited data to understand or predict fraud attacks. But a network of millions of data points across dozens of industries help to shape what risk looks like today, and AI is able to take that information to create an actionable safety rating, like Kount’s Omniscore.
Climbing Fraud Mountain
The chargeback rate has increased 20 percent so far this year as the number of digital fraudsters grow by the day, and Stuppy said he thinks there’s more to come. The world of eCommerce has accelerated with the huge digital shift caused by the pandemic. Chargebacks aren’t just criminal fraud, either. Friendly fraud, or when the real customer disputes a legitimate transaction, is a contributing factor. With cancellations and confusing return policies, these disputes are critical to address.
“A lot of times when you’re climbing a hill, you can’t see how tall it is going to be,” he said. “All you see is a bunch of rocks in your face, and you keep climbing and climbing. I think in the case of the ‘fraud hill’ we are climbing, that is going to continue for quite some time because we are nowhere near the peak.”
He said fraud will continue to grow until merchants better master digital tools and experiences and are thus able to keep the bad guys locked out.
But Stuppy said that while the journey will be challenging, it will ultimately be worth it. When merchants eventually reach the summit, their customers will enjoy smoother, more seamless journeys end to end — and be confident that their personal information is secure.