Fraudsters hide in plain sight, blending in with legitimate customer traffic – just like their comic counterpart ‘Wally’. With so many people following the same journey it can be a challenge understanding what is legitimate vs. illegitimate and finding the true identity of an individual amongst the crowds. This is why companies accept a certain amount of customer disruption as an undesirable, but necessary, part of finding them.
However, the level of this disruption is wildly out of balance. The ratio of disrupted legitimate traffic to actual fraudulent attempts is now as high as 30 to 1. In other words, 30 legitimate customers are challenged or blocked — for reasons they rarely understand — in order to catch one fraudster. As more purchases (and, therefore, more fraud attempts) move to the online 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 online activity, as opposed to just a few years ago when consumers welcomed banks and finance companies protecting customers from the ‘bad guys.’
To reduce customer disruption and appropriately manage risk, companies need to apply fraud mitigation strategies that reflect the value and level of confidence needed for each transaction. Therefore ‘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.
The question is, how do businesses decrease their disruption, caused by complex fraud checks, to ensure honest customers aren’t inconvenienced?