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5 Questions to Ask When Choosing a Fraud Solution

If you’re selling products or services online, there’s practically nothing more insidious than fraud -- it can erode customer trust, damages your reputation, and, most importantly, costs your business money. In fact, Juniper Research predicts that merchants globally will lose a combined $130 billion between 2019 and 2023 via card-not-present (CNP) fraudulent transactions.1 Add indirect costs like staff time spent notifying customers, legal assistance, and brand-reputation management, and it’s no wonder that ecommerce fraud remains the top issue for retailers.2

The good news is that implementing an effective fraud-protection strategy can not only can help detect and prevent fraudulent activity, it can also offer your business a competitive advantage. The right fraud- and risk-management solution can lead to increased conversions, revenue growth, reduced operational costs, improved customer experiences and loyalty, and heightened brand value.

But it’s important to remember that the wrong fraud-prevention tools can potentially cause you more trouble, including increased false positives and costs. The key is understanding what capabilities are necessary to provide superior fraud protection for merchants, as well as selecting one that includes those attributes, is effective on both web and mobile, and is flexible enough to address your business’ unique fraud-fighting needs.

With so many merchant fraud-protection options available, each with different capabilities and overall effectiveness, how do you choose the one that works best for your business? Start by asking any potential partner these five questions:

1. Does the solution leverage a wide variety of data?

Leading merchants are using data to their advantage in a variety of ways, from anticipating customer needs to identifying causes of cart abandonment to evaluating regulatory compliance. But collecting this data is just the first step. To effectively put it to use, you must be able to organize and control your data -- something that's a struggle for many businesses.

A powerful fraud-prevention solution should start with a rich data set for both web and mobile, but also leverage internal and external data in any form. As you review fraud-prevention platforms, evaluate the vendor's data collection, integration, and analysis capabilities to make sure data is working hard for you.

2. Will it scale and adapt to a changing fraud environment?

CNP fraud is a complicated crime that is constantly evolving. The criminals are becoming more sophisticated, and the methods change often. Merchants need to stay on top of the latest threats and ensure that their strategy addresses the most pressing risk -- even if that risk is different from what it was yesterday or last year.

Unfortunately, some fraud solutions require specialized skills, such as writing SQL queries, to modify the rules and adapt the approach. These requirements add to the resources needed to stay in front of fraudulent activity and make it challenging to respond in a dynamic environment. Look for a fraud solution that allows merchants to easily modify and optimize rules and models, as well as test the impact of those changes before you implement them.

3. Does it leverage machine learning to proactively detect fraud patterns?

In a similar vein, many legacy solutions have left businesses vulnerable to emerging attack patterns. As the pace and volume of fraud threats continue to increase, and as fraudsters find new ways to attack businesses, fraud teams are struggling to effectively deal with threats due to poor data quality, ineffective alerts, and non-existent or outdated intelligence.3

Big-data analytics and machine learning provide an answer to this scenario, allowing merchants to constantly adapt to evolving fraud. Machine learning models evolve based on new events and data, and can recommend new rules that continuously enhance detection to provide merchants with an advantage in the fight against cybercriminals. In addition, machine learning models that provide explainability into why decisions are made give merchants more insight and control so that the decisioning process can be adjusted to unique needs and risk tolerance.

4. Can it make real-time decisions?

Enhanced fraud prevention is the goal, but in light of increasingly strict rules for fraud detection, many merchants have witnessed their rate of false positives grow. One study estimates that false positives account for one-third of declined transactions.4 This is no small thing -- incorrectly flagging a legitimate customer or requiring unnecessary authentication can lead to increased friction, shopping cart abandonment, lost revenue, and even defection to a competitor.

The right tool can help businesses balance the customer experience with fraud prevention by enabling real-time decisions for transactions. Prioritize fraud solutions that provide behind-the-scenes, real-time decision-making with a rich historical data set -- that could help head off the bad actors while reducing payment challenges for good customers.

5. Can it help improve operational efficiency?

Many merchants still rely on manual or semi-manual systems to facilitate much of their fraud-prevention and detection efforts. This increases the cost of their operations and makes it hard to scale initiatives as the enterprise grows. As fraud continues to rise and evolve, merchants need intuitive tools to improve efficiency and productivity.

With the right fraud solution in place, many businesses can reduce manual reviews, reallocate resources, and streamline operations. Look for a solution that simplifies fraud screening by automating previously cumbersome processes and that offers the ability to customize workflows. An intuitive user interface can also help boost productivity.

Helping to prevent fraud today, tomorrow, and into the future

As a merchant, you need to evaluate the unique needs and objectives of your business and find a fraud solution that aligns with those priorities. Regardless of your specific business requirements, understanding what separates good fraud solutions from great ones is critical.

With this information in mind, you'll be able to select a solution that helps accurately prevent fraud and provides actionable insights -- leading to faster, more effective decisioning that enhances the customer experience and positively impacts revenue.

With access to decades of risk data across Braintree and PayPal, Braintree Fraud Protection can help you increase authorization rates while reducing false positives and manual reviews. You can find out how our machine learning-based solution can help your business accurately detect fraud in real time and control risk through continuous optimization here.

To learn how Braintree can help your business manage risk and grow revenue, connect with our Sales team.

  1. 1. Retailers to Lose $130bn Globally in Card-not-Present Fraud Over the Next 5 Years, Juniper Research, January 2019.
  2. 2. Fraud still retailers’ top payment issue despite EMV, National Retail Federation, November 2018.
  3. 3. Combatting payments fraud and enhancing customer experience, McKinsey & Company, September 2018.
  4. 4. False Positives: The Unintended Consequences of Mitigating Card-Not-Present Fraud, Fidelity National Information Services, October 2018.

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