How can retailers create a fraud-free online shopping environment?

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n a survey of over 2,000 consumers by emerchantpay, post-pandemic, 46% of shoppers feel that there is a greater risk of fraud, with 47% saying they would only shop from trusted businesses.

Their fears are not unfounded. Juniper Research has calculated that expected losses due to fraud will exceed $206bn over the next five years.

However, despite the perceived and proven risks, online shopping still represents a potential £74.6bn ($103.2bn) revenue opportunity for online retailers. As the fourth-quarter gifting season approaches, creating the golden quarter of retail, it will be in merchants’ best interests to seize this opportunity by securing a position on the 'safe' list.

Below are some pitfalls to watch out for and actions merchants can take to ensure a safe, secure environment for their online customers.

Among hackers and scammers who steal bank account details, social security numbers and other personal information, cybercriminals more frequently benefit from access to databases that contain credit or debit card information.

One of the most common risks of theft at the point of transaction, according to UK Finance, are impersonation scams. In these cases criminals mimic trusted organisations and convince customers to pay for fictional goods. Where UK losses from authorised payments equated to £479m in 2020 alone, 39,364 instances of impersonation scams were nearly double that of the previous year.

Since the popularity of e-commerce continues to grow post-pandemic, retailers need to make the safety of their customers’ data a priority if they do not want to lose them to fear of fraud.

By keeping a watchful eye on the fraud landscape, merchants can ensure that their security offerings are up to par in an increasingly digital environment. To take action, they must invest in identification software themselves or partner with a payments provider that has the tools and expertise to combat fraud.

Customer experiences are now largely split between physical store interactions and online shopping experiences. Online and in-store payments add a layer of complication to keeping track of the customer relationship.

Adopting a unified commerce strategy with integrated fraud detection solutions helps merchants stay on top of all transaction history. As well as optimise their overall payments’ performance, with this platform retailers can combat fraud more efficiently with access to a single view of each customer. As such, consumer behaviour patterns and historical transaction data can be used to detect and prevent fraud in real time.

Furthermore, merchants and retailers which partner with trustworthy payment service providers can leverage a global anti-fraud network. Through these partnerships, retailers have access to extensive customer transaction data which is protected by advanced fraud solutions and authentication techniques.

While protecting customer payments, these solutions also contribute to a frictionless shopping journey that builds on confidence in the brand itself.

Realising that there are fraud prevention techniques out there is the first step for retailers who want to make a change and protect their customers for good. Next is finding out what the solutions are, why they work and how they can be implemented.

Payer Authentication (3-D Secure)
Cardholder authentication measures like Payer Authentication allows cardholders to create a PIN (secure code) that can be used during checkout to confirm the user’s identity. This trusted technology powers Verified by Visa (VeB) and MasterCard SecureCode, both of which provide merchants with chargeback protection against fraud-related disputes and keep interchange rates low.

Risk Scoring
Risk scoring tools recognise fraudulent transactions based on a number of statistical models and set rules. This calculates the probability of fraud when a transaction has been completed via a website in real time. When the probability of a transaction being fraudulent is higher than usual, this notifies the merchant to verify the order.

Real-time rule-based fraud-prevention techniques
Sophisticated fraud prevention systems can be based on rules that consider geo-location, count parameters, negative data, recognisable fraud patterns and other elements. By improving filtering processes, fraudulent transaction attempts can be prevented as soon as they occur and brands can reduce costs at a later stage, too. For example, this gives them added protection in disputes regarding losses and fees, potential assessments for claims of negligence in fraud prevention, and brand reputation loss which can result in losing customers.

Retailers which plan to ride the digital economy wave will need to evolve with it. While full protection against fraud should be a priority, customers also want to have confidence that brands are delivering security.

So, in the case of delivering data security, businesses of all sizes need to constantly re-evaluate the efficacy of their tools in managing fraud risks. And in the case of maintaining hard-earned customer trust, brands should back up their efforts by making sure the journey is sleek, transparent and demonstrative of security measures.