If measured as a country, fraud is a US$6tn economy and growing by the day, due to insufficient collective action.
The pandemic has driven even the least tech-savvy to the virtual world for everything from work to shopping for groceries. This has translated to the evolution of new consumer habits acclimatized to virtual transactions – causing an increase in the usage of digital payments over the past year.
Unfortunately, as e-payment demands evolve, so does fraud—growing ever more complex and sophisticated. Yet even while an estimated eight in 10 businesses in the Asia Pacific region (APAC) expect security breaches to rage on, many are simply not taking action to prevent such threats.
In fact, synthetic identity fraud is growing, with 61% of merchants reporting higher rates of such fraud in APAC—the highest incidence globally. Nine in 10 Singaporean merchants have reportedly lost revenue due to payment fraud. In Singapore, synthetic identity fraud and account takeover fraud were ranked tops in causing operational and revenue losses.
One thing is for sure: fraud is a virus that will only continue multiplying into a serious liability. As the adage goes, prevention is better than a cure. Poor customer experience and preventable losses make businesses sitting ducks without the necessary precautions.
Fight fraud on four fronts
Fraud can be the stuff of nightmares: it has been predicted to inflict damages totaling US$6tn globally, and if measured as a country, it would be the world’s third-largest economy after the US and China.
- Deploying chargeback solutions
Chargebacks are often a cost of doing business. The pandemic triggered much more chargebacks, and while many were legitimate, some were the result of fraudulent activities. Chargeback protection solutions can help businesses automatically manage disputes and recover time and money. Businesses should also implement strong verification methods that can check if the billing information a customer inputs matches the billing information on file with the issuer. Creating automated flags for unusual orders, such as an order with a high quantity of the same product, is also an option.
- Leveraging machine learning
Preventing fraud by flagging potential fraudulent transactions must be done accurately. Inaccurate flagging of false positive fraudulent transactions costs time and compromises the customer experience. Data analytics at scale and machine learning in the cloud can be used to detect and mitigate fraud effectively and accurately. Simultaneously, migrating on-premises databases to the cloud lets machine-learning models and data analytics solutions deliver the same performance as legacy systems at a lower cost.
- Collaborating with stakeholders
Fraud protection should not happen in silos. Prioritizing the protection of online transactions should be done in partnership with in-house expertise and industry partners. Collaboration can improve the time to detection, ultimately reducing financial and brand costs.
- Keeping on one’s toes
If there is one definitive trait about payment fraud, it is that it is constantly changing. Ongoing diligence is needed if we hope to keep fraud at bay and customers safe. This means upgrading authentication or tokenization when able; being on-the-ball with creating sophisticated solutions for chargebacks; or even sharing tips on how to identify the latest fraud scam with customers.
Ultimately, businesses that approach payment security holistically will emerge stronger in the long run. Finding the balance between managing risk and enhancing the customers experience will be a challenge, but it is the only way forward to navigating the increasingly complicated space of digital payments.