Reducing the risk of fraud

By David Jeffrey, Director of Product, Barclaycard Payments

Online shopping has scaled to new heights during lockdown, and fraud is also on the rise. Therefore, it is crucial that merchants have taken steps to safeguard themselves against risk, with the best possible defences in place.

There are several easily implemented techniques that combine emerging technology and rule-based analysis, to streamline the fraud prevention process and ensure companies don’t accidentally block transactions by genuine customers.

Knowing which preventative measures to take, and which to avoid, can be challenging for businesses operating online. To help, Barclaycard has pulled together five top tips for merchants looking for answers.

1. Define your customer experience and flag unusual behaviour

It’s imperative that companies are analysing all customer behaviour, so that when there is an anomaly, it can be quickly and efficiently blocked or flagged. Using behavioural analytics based on historic and real-time data makes it possible to detect unusual customer behaviour and consistently detect new fraud patterns. Machine learning-based systems pull data from constantly changing data sets and can find hidden connections, which makes it possible to detect even subtle fraudulent activities.

2. Define your risk appetite

Deciding what your appetite for risk is as a business and developing your payments strategy accordingly plays a crucial role in fraud prevention. Depending on the value of the goods you’re selling, it’s important to have screening tools in place to protect your business from fraudulent transactions and data breaches.

Some payment types and transactions carry more risk than others. For e-commerce, the level of risk that a merchant is exposed to can be significantly reduced by Strong Customer Authentication (SCA).

3. Create a fraud strategy with dynamic friction

Introducing sufficient safeguards and friction to combat fraud – while still providing a seamless customer experience to genuine customers – is a delicate balance to strike. Companies need to distinguish between helpful, positive friction that prevents fraud, and harmful, negative friction that hinders the customer journey. Once this distinction is made, businesses can start to eliminate negative friction points whilst optimising the positive ones.

4. Use data analysis to increase revenue

Historical data can be invaluable to measure risk and make informed policy changes. For example, instead of reviewing every order that is over £500, you can use historical data to evaluate which kind of customers such a policy would impact and what percentage of sales over the £500 limit would be

flagged as fraudulent. Once businesses have an efficient process in place, they can reallocate resources from risk to revenue, while reducing customer friction and improving the shopping experience.

5. Align fraud and risk policies with the “new normal”

As we move through this period, customer behaviour continues to change rapidly. To stay ahead, businesses must continue to evaluate the wider landscape and adapt their risk policies to reflect this shifting consumer behaviour in real time.

Whatever the size of your business, having the right tools and processes in place to help screen for fraudulent activity is becoming increasingly important. As fraudsters become more sophisticated in their methods, so too must the companies that trade online

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