With cyberattacks on the rise and the cost of fraud skyrocketing, merchants of all sizes are in for a bumpy ride for the next several years. But the way fraud takes place is changing, in ways that might surprise you. Here’s what you need to know about the fraud that happened in 2016, and here’s what you should do about it in 2017.
4 Ways Fraud Might Evolve Next Year
A new study by Javelin identifies some disturbing new developments in online credit card fraud over the past year:
- The number of fraud victims is growing, even though the dollar amount stolen has decreased. Fraudsters are smart, and they’re increasingly committing fraud via smaller transactions that are more likely to escape unnoticed by the merchant until it’s too late. The payoff for each stolen cache may be less, but the chances of success for the thief are much higher.
- As EMV becomes more common in the United States, new account fraud is on the rise. The more stringent point-of-sale security with EMV cards means that criminals are less likely to get away with using stolen or fabricated cards. So they’re shifting their attention to new account fraud, for example, using stolen consumer identities to illegally open new credit card accounts.
- Consumers simply don’t trust financial services institutions. As a result, they’re less likely to use the fraud protection services offered to them, like email alerts or transaction monitoring. This means that when a consumer’s identity has been stolen, it may take longer to detect, which increases the amount of damage the thief can do.
- S. consumer information is increasingly being used for overseas fraud. Fortunately, card issuers are detecting 69% of these cases. Unfortunately, that still leaves 31% of global fraud going undetected. And although consumers are typically protected by card issuers when these fraudulent transactions are made, merchants are left to bear the cost of the stolen merchandise, lost shipping and handling expenses, plus chargeback fees.
The best way to combat these trends is by staying on top of and implementing current fraud management solutions. Here’s what we see in store for the industry.
Top Fraud Management Predictions for 2017
It’s clear that as soon as new fraud technology evolves, so do cybercriminals. Nonetheless, there are several strategies you can employ to remain one step ahead of them.
More merchants will focus security efforts on mobile shopping apps
Everything in 2017 will be mobile. Google is transitioning to a new ranking algorithm that heavily weighs mobile-friendliness as a major factor. Mobile commerce is skyrocketing and is predicted to account for half of all e-commerce sales by 2017. And fraudsters are picking up on the trend.
A major challenge for merchants here – and opportunity for thieves – is that as fast as retailers are churning out new shopping apps, they aren’t always thinking through the fraud management components of the app.
- E-Retailer Tip: Fraud solutions such as IP geolocation, real-time transaction tracking and customer profile databases are readily available and can dramatically improve your ability to verify mobile purchases.
Fraud prevention networks will grow in popularity
There’s a tendency among merchants to be highly protective of their data. It’s understandable. And yet, data may be the key to spotting fraud. Cybercriminals are sneaky, and they know just how to fly under the radar of the most typical fraud prevention measures. But when you look across lots and lots of transaction data, a bigger picture emerges – and fraudulent trends become apparent.
This means that it’s in merchants’ best interests to get over themselves and start sharing their data. One of the best ways to do this in a structured way is to join a fraud prevention network.
These networks are designed specifically to watch for attacks and warn member businesses. Alone, merchants simply can’t see the big picture. Together, there is power in numbers – the power to identify trends in a much more cost-effective way than going it alone can ever match.
- E-Retailer Tip: Networks should never seek to share confidential consumer information, such as credit card details.
Human analysis will increasingly support and complement artificial intelligence
Artificial intelligence – also called advanced machine learning – is everywhere these days. It’s one of the top 10 strategic technology trends in 2016 according to Gartner, and few areas have leveraged it as fully as the fraud management industry. It’s a fast, cost-effective solution that smartly takes advantage of algorithms and big data.
And yet, artificial intelligence on its own is still limited.
A major problem with automated fraud screening solutions is that they invariably lead to legitimate transactions being falsely declined, which benefits no one.
Integrating human intervention with automated systems can reduce the number of these falsely declined transactions. Moreover, as human analysis leads to more accurate fraud decisions, adding those analytics back into the automated tools is where the true “machine learning” takes place – making the entire system smarter and more accurate.
- E-Retailer Tip: Target your hybrid human-AI solutions to your product space, customer demographics, and geographic markets. For example, an IT-goods retailer and a jewelry retailer will need very different fraud strategies.
Leveraging Predictions to Create Fraud Management Goals
No company wants to headline the next security breach. Stay one step ahead of fraudsters by being aware of the latest fraud management solutions. New types of fraud are emerging every day; you must be aware of them in order to protect your business and your customers.
While fraud management solutions are very much a science, they’re also an art. Want to learn more about how we’ve combined the two approaches into a robust, comprehensive strategy that offers total guaranteed protection? Contact one of our fraud protection analysts today.