As fraud professionals, it’s natural to focus on preventing fraud losses, but this often comes at the detriment of sales conversion. The nature of model-based risk management platforms and machine learning model training has this bias as well, mainly as a result of the fact that it is much easier to recognize missed fraud than it is to recognize sales insults.
Fraud and risk management strategies tend to focus so much on automated risk decisioning that improving manual review performance is often an afterthought. Consider the cost savings and increased revenue an organization could realize by cutting average order review times while also reducing sales insults and missed fraud on reviewed orders. This is why improving performance of manual reviews is at least equally important as efforts to reduce order review rates.
The accelerations in eCommerce Delivery, Marketplaces and the gig economy have companies scrambling to make better decisions, faster. Model-based applications are being applied to address wider areas of fraud, as they can detect threats more precisely and efficiently.
13% of organizations today have adapted Machine Learning and AI into their fraud detection protocols. Another 25% of organizations plan on converting from a rule-based system within the next two years.
In Europe, digital retail payments were to be become more secure and less susceptible to fraud with the introduction of SCA. Yet a new standard for competition is being set for payment service providers to create SCA payment flows with minimal friction.
The EU has set the stage with its SCA (Strong Consumer Authentication) regulations designed to make digital payments more secure. The goal of this implementation is to increase the level of security surrounding electronic payments that benefit both consumers and merchants, but is the end result meeting the objective?
According to a recent survey, more than one-third of merchants have seen at least 10 percent of their user accounts taken over in the past year while more than one-quarter of merchants have no measures in place to protect against account takeover. Meanwhile, less than 8 percent of consumers were notified about account takeover incidents by the merchant custodian of their compromised account.
Many merchants both within and outside of Europe are concerned with meeting Strong Consumer Authentication (SCA) requirements and how this might impact sales when nearly every eCommerce order over €30 will require two-factor authentication. A lesser known fact is that this order value threshold for requiring SCA increases in multiple tiers based on the fraud rates of both the acquiring and card issuing banks facilitating the transaction, suddenly making the fraud rates of a merchant’s European processors much more important.
While it is commonly accepted that passwords and the consumers who set them are inherently insecure, organizations put a lot of trust behind two-factor authentication (2FA) solutions. Here are several ways fraudsters have been able to beat this additional layer of security.
The UK’s Financial Conduct Authority (FCA) recently suggested that milestones related to ensuring Strong Consumer Authentication (SCA) compliance by March 31, 2021 may need to be postponed due to the COVID-19 pandemic. The European Banking Authority (EBA) has maintained their December 31, 2020 deadline but will continue to monitor the events and reassess.