The digital economy demands a new approach to fraud management

By Andrew Naumann, Vice President, Product Management – Merchant Solutions • CyberSource

January 04, 2017

To capitalise on new sales opportunities and meet customer expectations, almost every business today is building out its digital channels. Businesses are committed to streamlining online purchasing while maintaining a consistent customer experience.

Many of the same innovations that are driving the digital economy forward are also creating new fraud management challenges. For example, fraudsters are developing different ways to take over customers’ online accounts and use stolen credit card information to make fraudulent purchases.

The increasingly prevalent account on file (AOF) eCommerce model presents a fraud management hurdle. With the AOF model, businesses store account information for repeat customers, helping to accelerate checkout. A customer account might include credit card information, home address and phone number, and even addresses and phone numbers of friends and family. The business must protect that account on an ongoing basis, not only at the time of a transaction.

Traditional fraud models are inadequate

To remain competitive, businesses need to rapidly respond to evolving customer expectations and deliver engaging experiences. But at the same time, should consider adjusting fraud strategies to better defend customers and the business against new threats.

Traditional fraud management solutions are often inadequate to address today’s fraud threats. Point solutions, which focus on a single threat or capability, are not designed to protect against the full range of fraudulent activity. Moreover, many traditional solutions have a single focus on minimizing the direct losses caused by fraud and do not address the need to balance fraud risk with operational costs and the customer experience.

Businesses need a holistic approach—one that begins by reducing the threat of fraud when the customer first establishes an account and continues all the way through the moment an online transaction is approved. By implementing a multi-layered approach to fraud management, businesses can maximize the effectiveness of fraud prevention while controlling costs and delivering an exceptional customer experience.

A holistic approach to fraud

A multi-layered fraud management system offers a holistic approach that can help reduce fraud at each stage of the customer buying process, while helping to control costs and minimize the impact on the customer experience. Each layer can help thwart fraud and identify good customers, so businesses can make a better decision about accepting or rejecting a purchase.

Optimization is a process, not an end state. Collecting information, tracking trends, and testing new rules are key to effective ongoing fraud management. As fraud and the digital economy are rapidly changing, your business’ fraud management strategy will benefit from continuous evaluation and adaptation.

Staying competitive in the continuously changing digital economy

The digital economy is dramatically changing how consumers shop and interact with businesses. To stay competitive, businesses must embrace these changes. They need to open new digital channels and deliver fast, convenient and engaging digital experiences.

At the same time, many businesses will also need to re-evaluate their approach to fraud management. They need a holistic approach that can address the new risks ushered in by the digital economy without introducing excessive operational costs or placing too many obstacles in front of customers.


This article was originally published on the CyberSource blog.

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