Vesta’s Vice President of Product Management, John Venglass, recently participated with other leading fraud fighters in making bold predictions for 2023! These insights will help merchants, SMBs and enterprise organizations to protect themselves effectively against fraud threats.
Merchant Fraud Journal is an independent and unbiased publication dedicated to empowering online sellers to greatly reduce the impact of eCommerce fraud on their businesses. Its core mission is to break the silos surrounding merchants’ internal fraud prevention processes by bringing together industry professionals to share their knowledge with one another.
What is the most important thing merchants can do to fight fraud effectively without harming the customer experience?
The best way to fight fraud without harming the customer experience is to proactively engage a capable fraud detection system that uses auto-decisioning to differentiate between a malicious fraudster and a legitimate customer. In fact, the right solution can actually enhance the buying journey for legitimate customers. Online Fraud Detection (OFD) systems that use advanced machine-learning (ML) modeling techniques combined with customer behavioral data are very efficient at making automatic decisions in milliseconds, without adding friction or inconveniencing customers with extra steps.
What does an omni-touchpoint fraud prevention strategy look like in 2023?
As an industry, we’ve been incorporating more segments of the customer journey into the overall view of fraud prevention, and there are a few solutions out there that will look at account access events, purchase events, return events and promotional events. There are still additional single-point solutions, such as validating identity at account opening, that should be added to get the most thorough coverage across the customer journey. Merchants should look for ways to orchestrate these solutions together, or for vendors who offer the solutions in an orchestrated way, to effectively understand and deter fraud from the various vectors across every entry point.
What additional friendly fraud challenges will merchants face in a recessionary environment, and what is the best way to mitigate them?
Times of financial uncertainty typically see an increase in all types of fraud. For friendly fraud, merchants can expect to face a potential rise in “Item Not Received” disputes, as well as more traditional first-party fraud cases such as claiming that they didn’t make the purchase when perhaps they forgot they did or weren’t aware that a family member or authorized user made the purchase. This type of fraud is very hard to predict, and the best management strategy is currently to leverage chargeback alerts/deflection products to minimize these types of chargebacks. Additionally, offering Buy Now Pay Later payment options can tempt individuals to spend outside of their limits, creating more opportunity for return fraud.
How should merchants be preparing for Payment Services Directive 3 (PSD3)?
It is likely a bit too early to begin true preparations, however there are a few things that can be done to help ensure you’re ready when the new framework is released. How should merchants be preparing for Payment Services Directive 3 (PSD3)?
- Evaluate the payment types you allow for purchases. One of the specific topics being considered is additional regulations for nearly unregulated payment types like BNPL and crypto. Inventorying those additional types you allow, as well as understanding how much of your revenue they make up in a given month, will prepare you to understand the potential impacts of new rules for these.
- Conduct a 3DS exemption review. If you’re currently operating under PSD2 and leveraging 3DS for your transactions, understanding how much of your order traffic is eligible for exemptions will help you understand the impact of any changes to the exemption process, limits and other changes that might impact your payment flow.
- Look for Strong Customer Authentication (SCA) products other than 3DS. As PSD3 is considered, other or newer SCA methods may be introduced. Understanding the vendor landscape for authentication techniques such as location-based authentication or biometric authentication could put you ahead of the pack in implementing these.
What will be the biggest 2023 eCommerce fraud trend that is currently being overlooked?
Unfortunately, there are several types of fraud that seem to be on the rise and should not be overlooked. First, fraud from social engineering is a growing concern, especially during an economic downturn. Financial uncertainty breeds increased susceptibility to email, text and telephone phishing attacks. Secondly, machine learning-enhanced attacks are also a growing threat. This is the idea that the bad guys are using the same advanced technology and tools to perform fraud that we are using to prevent it. They are using ML to create and enhance synthetic IDs, which optimizes attacks on merchants. ML by the bad guys can also be used to anticipate and counter fraud detection and prevention measures. Lastly, ecommerce merchants need to beware of growing fraud through alternative payment methods, such as BNPL. These new payment types are popular and convenient for the shopper, but don’t have a standardized dispute process or solid policies for chargebacks, and companies are losing big money.
A Strong Fraud Prevention Strategy is Essential
With the holidays dawning upon us, the best way to improve your company’s fraud prevention strategy is to implement a solution that can quickly adapt to changes and continuously improve upon itself. At Vesta, we guarantee every transaction we approve to completely take the burden of fraud off the shoulders of merchants so they can focus on growing their business. If you’re interested in learning more about our fraud solutions, click here to request a demo of our platform.