In the fight against payments fraud, proactivity and collaboration make a powerful combination.
Proactivity serves as a protective shield, where measures are taken to halt fraudsters in their tracks before they can cause any damage.
But, as with any shield, there may be chinks in the armor. This is where collaboration comes in, building a robust network of defenses where each team has its expertise and information.
When this knowledge is shared and combined, the result is a winning recipe for effective fraud prevention. Organizations can better identify and prevent fraudulent activities, making the payment environment safer for everyone involved.
In this blog, I explain how merchants can leverage existing fraud tools and strategies, and collaborate with external parties to make the payments space safer for everyone.
How to better leverage existing fraud prevention strategies and tools
Data silos are a fraudster's best friend. That’s why breaking down the silos between your organizational departments is the first step toward effective fraud prevention.
Promote a data-driven culture
Here are some strategies that fraud teams can adopt to promote a data-driven culture:
- They can promote a data-driven culture that values information sharing.
- They can standardize data structures to make analyzing data from different sources easier.
- They can invest in data warehouses and integration platforms to centralize data.
Fraud teams can also build cross-functional teams and use data visualization tools to promote collaboration and data sharing. By implementing these strategies, fraud teams can gain a more comprehensive view of their data, which will help them develop more effective fraud prevention strategies.
Balance offense and defense
The majority regards fraud as a necessary cost of doing business. The cost of complete fraud eradication often greatly outweighs the benefit of a zero-fraud business - significant lost sales and poor customer experience resulting from false positives (i.e., blocking of genuine shoppers).
A good fraud mitigation strategy would be finding the sweet spot of offense (active fraud prevention) and defense (picking the right battles to defend the disputes with a high possibility of recovery) + the feedback loop between offense and defense.
Leverage the expertise of risk solution providers
While leveraging the expertise of risk solution providers can be appealing, it's important to recognize that no one knows a merchant's business better than the merchants themselves. While complete outsourcing to an expert may seem like a good option, it's important to maintain human oversight - much like self-driving cars require human judgment to ensure things don't go awry.
When deciding on a risk solution, choose a provider with industry expertise and a proven track record of delivering strong results to similar businesses in your industry. Be transparent about your business and its unique risks, and don't rely solely on technology - make sure to take human oversight into account and monitor transactions and disputes regularly.
Evaluate the effectiveness of your risk solution provider on an ongoing basis, and adjust your strategy as needed. Finally, stay up-to-date with the latest trends and technologies in fraud prevention, and work with a provider on the cutting edge of fraud prevention.
End-to-end in-house fraud management systems
While some large enterprises may prefer to keep fraud prevention in-house with end-to-end fraud management systems, it's important to recognize that being an expert in everything is not always feasible. By leveraging the expertise of solution providers, businesses can plug into different points of the customer journey and optimize decision-making accuracy - particularly when tackling payments fraud.
Collaborate externally to strengthen fraud defenses
As an industry-wide problem, it's not just your responsibility to prevent fraud, but rather a collective effort involving everyone in the payments ecosystem.
Participate in industry-wide initiatives
You can collaborate with the payments industry by participating in industry-wide efforts and initiatives, such as joining fraud prevention networks and attending conferences focusing on fraud prevention. As mentioned in part one of this blog series, the Merchant Risk Council( MRC) is a fantastic community to join and use as a resource to find solutions together with other payment professionals.
Share crucial information with payment processor or bank
You should also work closely with payment processors to identify and prevent fraud by sharing information and developing effective prevention strategies.
For example, if you notice a pattern of suspicious transactions on an account and suspect that fraudsters are targeting it, you can then contact the payment processor to report suspicious activity and share information about the transactions, such as the time, amount, and location.
The payment processor can then investigate the matter and potentially block any further transactions from the suspected fraudsters, preventing financial losses for the merchant. By working together and sharing information, you and the payment processor can create a more secure payment environment and prevent fraudsters from succeeding in their schemes.
Implement best practices with the payments industry
You can also collaborate with the payments industry by implementing best practices for fraud prevention. An example could be implementing two-factor authentication (2FA) for customers to add more security to their transactions.
Additionally, you can use fraud monitoring tools like machine learning algorithms to detect any suspicious activity in real-time and take appropriate action to prevent fraudulent transactions.
Finally, regularly reviewing transaction logs can help identify any trends or patterns in fraudulent activity and help you develop more effective prevention strategies.
Collaboration and proactivity are crucial to prevent payments fraud. Sharing information among merchants, payment processors, and banks can create a secure payments environment that stops fraudsters in their tracks.
Just like a protective shield that ensures a safer payments ecosystem, proactive measures like implementing best practices for fraud prevention can help your business stay ahead of the latest fraud trends and tactics, and safeguard your business and customers from financial losses.
In part three of our fraud prevention blog series, I explain how you can determine the effectiveness of your fraud prevention efforts and make adjustments as needed to further reduce the risk of fraud.
Look back at part one of our fraud blog series where we explore how the changing payments landscape has led to new fraud challenges and what you can do to detect the risks and defend your business better.