Fraudsters are relentless, but they’re no more determined as you
Experian believes in a forward-looking way for businesses to approach fraud mitigation – one that will mitigate financial loss, enrich consumer relationships and drive growth. While most of the industry is talking about how fraudsters are circumventing current fraud detection systems and how businesses should fortify themselves against these vulnerabilities, this tactical approach will not outpace the fraud.
That’s why we approached this report differently. We’ve created it with senior business executives and fraud professionals in mind, offering new insights for how the alignment of strategies, teams and processes can protect growth ambitions from rising fraud threats.
Applying right-sized fraud solutions to reduce unnecessary customer disruption and manage risk
As more and more purchase volume and fraud attempts move to the on-line channel, the rate of challenges to legitimate transactions will only increase. The net result is a consumer population irritated by the unending number of challenges to their purchase activity, versus just a few years ago when consumers welcomed banks and consumer finance companies protecting their customers from the “bad guys”.
To reduce customer disruption and appropriately manage fraud risk, companies need to apply fraud mitigation strategies that reflect the value and level of confidence needed for each transaction. We call this right-sizing the fraud solution. This approach, when aligned with your company’s fraud rates and commercial strategy, increases the likelihood of catching fraudsters without disrupting the business of (and relationships with) legitimate customers. For example, if actual fraud attacks represent 1 to 2 percent of transactions, right-sized solutions should identify no more than 4 to 6 percent of transactions as probable fraud.
Knowing the universal consumer is the core of modern fraud mitigation and marketing
Knowing the individual customer extends beyond a traditional 360-degree view. It means having knowledge of a person’s offline and online behaviour, not only with your business, but also with other businesses with which that customer has a relationship. This information isn’t “owned” by a single organisation. It requires a more expansive view and collaboration across teams within a company, businesses within an industry, and across different industries. Applying the insights from information such as online behaviour, historical transactions, identity, biometrics, and device intelligence gives companies a more expansive view. It means truly being able to know and recognise your customer, and making their interactions with your business relevant every time.
Having access and insight into this universal consumer behaviour, down to the transaction level, will be necessary for fraud mitigation in the future. The ability to know and recognise a legitimate customer will make fraudsters easier to differentiate. This will mean fewer unnecessary and aggravating challenges to customers — frictionless is the future. It will also help achieve higher conversion rates for marketing campaigns and improve marketing return on investment by delivering the right message to the right person when they are most receptive to it and in the most convenient channel. Taken together, this is a clear example of the benefits of converging mandates around business growth and fraud mitigation.
Expanding your view through a blended ecosystem
Many organisations have launched projects to achieve a single customer view: collaborating across internal silos to bring together information about their customers and their interactions. While they’re good in theory, the conflicting priorities of internal silos turn these projects into multi-year undertakings that are challenging and costly. Even if attained, a company’s single-customer view may still achieve only a partial view of the consumer. This is because their view is solely based on their relationship with a consumer, rather than the consumer’s relationship with other companies. Fraudsters on the other hand have this broader view, and they use it to their advantage.
The volume of compromised data and ever-changing fraud schemes has created a threat landscape that can no longer be managed in a siloed manner. Increasingly, companies are participating in a blended ecosystem — working with vendors, customers, partners and even competitors — that can bridge disparate data and internal siloes.
Achieving agility and scale using service-based models
Fraudsters act fast, and companies must at least keep pace (and preferably be a step ahead). To spot the latest fraud attacks, many large institutions employ statisticians and modellers to monitor and develop rules based on different combinations of variables. These complex fraud risk models require a lot of time and investment to set up and maintain, and therefore, need significant rationale to develop. Once approved, it takes time – often months – to analyse, build and deploy the models. It’s at that point that companies can respond to the threat, but by then it’s likely that fraudsters have done damage.
Fraud adapts quickly, and when you’re too slow to respond to threats, it can come at great expense to your business and customers. Your systems and business processes become a source of vulnerability — which is why more companies are turning to service-based models that provide greater agility and faster response to emerging threats. Service-based fraud models give you the benefit of highly skilled expert analysis, analysis that is regularly updated to respond to fraud trends or incidents seen across the industry at any given time, often protecting you before the fraud happens. Service-based fraud models also adapt and scale to support your business, no matter how fast your volume grows or which products, channels or geographies you pursue.
Future-proofing fraud solution choices
Companies need to be as nimble as fraudsters, with fast access to the right tools and data whenever they need it. But that’s often not the case, leaving companies in the wake of evolving fraud schemes. The current approach of adding new tools on top of existing solutions is creating complexity that is becoming expensive to integrate and difficult to manage. You need flexibility and scale, to get more out of what you have in place, test strategies and utilise new technology. You need a way to connect the best solutions available and access a range of data sources to keep up with the speed of fraud.
We understand these needs and developed the first smart plug-and-play platform that allows you to connect to your own solutions, Experian products, and third-party vendors together in one place to better protect customers from fraud threats. It’s called CrossCore™ and it’s making the industry’s fraud and identity solutions work better for everyone.
Throughout our report, we discuss how these five trends will fundamentally change
the dynamics between companies and fraudsters. Enabled with greater knowledge and
more agility, companies will become a much tougher target for fraud. While fraudsters
will encounter more obstacles to thwart them, customers will encounter fewer challenges
to protect them.
Having greater knowledge and agility will require an expanded view about the consumer, further underscoring the essential collaboration between the product development, marketing and fraud teams. Collaboration driven by the shared goal for growing a sustainable business, and protecting those ambitions against rising fraud threats.