Protecting against fraud while providing a smooth client experience is essential for eCommerce retailers who see payment optimization as a possible source of competitive advantage. Even if other aspects of your payment plan are successful, any gains will be diminished if you overlook the effects of fraud. Similarly, if you overlook customer experience, you risk losing honest clients.
Refunds will hurt the bottom line, customers who have their legitimate payments rejected will shop elsewhere, and others will find it simpler to pass off legitimate transactions as fraudulent, making it even more difficult for the retailer to challenge claims. These are just a few consequences of failing to develop a thorough and data-based fraud strategy.
Furthermore, there is an increase in payment fraud. Therefore, it should come as no surprise that merchant fraud prevention has risen to the top of merchants’ priorities, according to a new poll.
So how can businesses prevent fraud while letting legitimate consumers in and keeping dishonest ones out? Understanding that fraud can occur many times throughout a payment route is essential. You can strike the correct balance by tackling the appropriate type of fraud at the proper time.
Here, we’ll look at the payment process, the various stages where fraud may happen, and what you can do to guard against it.
Merchant Fraud Prevention At The Commencement Of The Transaction
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The techniques available to merchants to combat fraud are numerous. They will all be necessary since fraud is complex and interdependent. In other words, a variety of attack vectors are simultaneously present for merchants, and many forms of fraud are mutually reinforcing. They, therefore, require a comprehensive strategy that includes a wide range of options.
Here are several strategies to prevent fraud before the transaction has been approved:
Verification: The most recent version of the 3D Secure protocol (3DS2) makes it much more difficult for scammers to pose as someone they are not. It mandates that users verify themselves using two out of three factors, including biometric information like a fingerprint, iris scan, or voice or facial recognition. Additionally, 3DS2 transfers the responsibility for fraud from the merchant to the credit card provider, which is better equipped, more knowledgeable, and more eager to carry out payer verification.
AVS (Address Verification Service), which asks for the cardholder’s complete billing address; CVV (Card Verification Value), which demands that the payer actually have the card in hand; and device verification, which determines whether the machine is utilized to pay for is the same as one that has been used in the past, are additional verification methods.
Merchant Fraud Prevention: During The Transaction
Despite the adoption of protocols like 3DS to stop fraud before the payment has been authorized, fraudsters frequently change their strategies to stay in business. This indicates that it is advisable not to rely on a single solution alone. Even if a merchant applies a solution like 3DS2.0 meticulously, it should still be overlaid with a separate risk analysis engine.
Steps You Can Take For Merchant Fraud Prevention During The Transaction:
Anti-fraud Software: The best defense against fraud is to thwart it at the source. Artificial intelligence (AI) and machine learning-based software can identify suspicious behavior and prevent a transaction that it judges to be possibly fraudulent. The more data you have that is relevant to the merchant and their consumers, the more your fraud engine will be able to learn and adapt.
Fraud guidelines An efficient fraud tool that should be part of a fraud prevention strategy is the ability to create rules for payments that either allow some payments through or stop other payments. Furthermore, combining these fraud standards reduces fraud.
Businesses can adjust their strategy in real-time and target the proper behavior by using fraud rules in addition to AI tools. Additionally, rules can be coupled to create risk profiles, which can then be weighted negatively or favorably. Then, these profiles can be tested, allowing each transaction segment’s parameters to be adjusted.
Network Tokens: Network tokens step up the verification game. Instead of account numbers, these are distinct digital IDs that take the form of tokenized values. These tokens take the place of private card information used for payments, protecting essential account information. As clients use their cards, card schemes automatically produce network tokens. A stolen token cannot be used elsewhere, providing end-to-end protection and lowering the risk of malware and phishing assaults.
Merchant Fraud Prevention: Post-Transaction
Even after a transaction has been allowed and multiple levels of fraud prevention have been applied, fraud can still happen. While enhancing protection earlier in the transaction is the greatest approach to combat this fraud, businesses can still combat fraud after a transaction has been approved and even after the fraudster has received the products or services.
After the transaction has been authorized, fraud can be fought with the following:
Management Of Disputes: Some retailers view friendly fraud and subsequent chargebacks as necessary for doing business. However, winning disputes can be assured by managing them properly. A company that manages disputes effectively will know when to resolve a conflict rather than litigate it. Merchants have an edge when responding to disputes by using a portal since they can see why a disagreement was raised and what proof they should offer.
Merchant Fraud Prevention Software Solution
Every merchant is different regarding the dangers that fraud poses to their organization, the forms of fraud, and the points along the payment process where this fraud occurs. To balance these dynamics, data and testing are essential. The data should be as specific as possible. Knowing your consumers, including their identities, payment preferences, and buying habits, makes it simpler to detect fraud as it occurs. Granular data also reveals areas of a company where fraud is most likely to occur, enabling merchants to deploy the best solutions where they are needed.
Applying all of these ideas can be challenging, of course. Importantly, using fraud prevention methods might make customers unhappy, which can destroy conversions. However, employing merchant fraud prevention software solutions at every step of the transaction path will provide a frictionless and seamless user experience, which results in fewer cart abandonments, more customer conversion, and, ultimately, more income.