Many companies feel that protecting transactions is the most important area to which to shift their focus after the account opening stage. Transactions certainly should be considered, but one of the other benefits of looking at account activity (or non-monetary transactions) is that you’re stopping the emerging threat earlier and not chasing money after the transaction.
Chasing fraud post-transaction traditionally required a heavy operational expense. It is a labour-intensive process, requiring skilled investigators who can make split-second judgments about transaction legitimacy. Because investigators have to look through such a high volume of transactions, they may err on the side of blocking transactions automatically to give them more time to investigate.
Even investigations can be thwarted by fraudsters. They can forward phone numbers (via telecommunications and cell providers). They can change the numbers associated with an account earlier in the lifecycle and let that sit for 45 days so it looks like an established number on the account. When an investigator calls later to verify a transaction, they are calling the fraudster, not the actual customer.
Having an accurate initial filter is critical to achieving more efficient, more effective and less costly fraud mitigation downstream. You can apply investments (especially skilled investigators) in downstream resources to review more sophisticated cases and perform rich link analysis. Rather than working the events in the queue sequentially, investigators can start looking at collective events and events across boundaries and relationships.
This also drives toward a right-sized fraud approach. The benefit is that hundreds of investigators are no longer spending time reviewing a high volume of false positive transactions to try to identify a small number of fraudsters.
Right-sizing fraud solutions and strengthening fraud measures earlier in the lifecycle of customer interactions is even more applicable to e-commerce vendors. Loyal customers can make purchases without logging into their accounts, so there is no profile information with which investigators at the transaction stage can quickly ascertain whether the charge or purchase is legitimate.
Business application: Increase in card-not-present transactions requires agility
Card-not-present transactions are highly susceptible to fraud. This broad, ever-expanding category includes mobile wallets, digital wallets and online payments using a credit card. What they all have in common is that the transactions are completely anonymous (requiring no face-to-face interaction with the customer).
In the drive to own as much of the consumer’s business as possible, companies are delivering a near-constant stream of innovative products and services. The inspiration for a large portion of these innovations is creating a seamless, convenient way for consumers to transact business, including:
- Starting a transaction on one device and finishing it on another.
- Enabling more ways of shopping and doing business on a single device.
- Storing personal and payment information on a site (card on file) to make future transactions faster and easier.
The mobile wallet is just one of the innovations that have challenged fraud detection at the point of transaction. When you consider all of the emerging card-not-present scenarios, it is clear that fraud teams will need to be a lot more agile in order to adapt and respond. The following are some of the changing and challenging dynamics of card-not-present transactions:
- Consumers are likely to adopt mobile wallet payments at a faster rate if EMV chip readers aren’t widely available.
- Consumers may use physical cards longer if mobile wallets are not accepted or are too difficult to use at common retailers such as gas stations, grocery chains, supermarkets and convenience stores.
- Consumers may value payment methods associated with loyalty rewards even above convenience.
- Consumers are likely to start adopting alternative payment methods using new types of devices, like wearables, as the Internet of Things (IoT) continues to increase.
- Consumers are increasingly likely to use their mobile phones to conduct more financial transactions; for the unbanked consumer population, this means unprecedented access to products and services.