Fraud prevention tools as a value-added service
Merchants’ desire to deliver an omni-channel experience increases the complexity around payments, and by extension the complexity around fraud management. The complexity is due to certain payment methods being more prone to fraud in different channels, increased risk exposure when entering new markets, or rules and regulations that shift fraud from one channel to another (i.e. EMV). As a consequence, consolidated and integrated fraud management is seen as one of the most important value-added services a payment gateway can now offer.
In 2015, ACI Worldwide commissioned Forrester to conduct research on the topic of omni-channel fraud, and revealed that 65% of retailers believe they lack adequate fraud management for an omni-channel environment. They also found that only 46% have consolidated fraud management solutions across all channels, although another 40% have this on their immediate roadmap, indicating that it is a high priority.
One of the challenges of omni-channel is that multiple customer touchpoints create more data, multiple channels demand more payment options, and consumers are demanding both convenient checkout and fast fulfilment. Merchants are being pushed to deliver a frictionless experience, which brings real-time fraud management to the fore. Real-time decisioning can help merchants to ensure a seamless checkout (maximizing conversion rates) and also help with the goal of faster fulfilment. The human touch is still needed though, to interpret trends and fine-tune real-time decisioning, and for this reason support from expert risk analysts is preferable to a ‘plug and play’ solution.
Omni-channel, however, is just a waypoint on the journey towards the so-called ‘Internet of Things’ (IoT), so the complexity around payments and fraud will only multiply. Consequently, value-added services will become an ever more crucial part of the payment gateway proposition, although they will also continue to function as intermediaries between consumers, merchants, card schemes, alternatives, and a range of financial institutions both traditional and disruptive. In the next few years, many more value-added services will emerge out of big data analytics, used for both business insights and to manage fraud.
Payment service providers and ISOs therefore need to bring together the most flexible and secure payment gateway solution, a full suite of sophisticated real-time fraud management solutions, consolidated reporting across all channels and payment devices, and interoperability (i.e. through open APIs). If they can do this, they will be well positioned to respond to the growing complexity. In this environment, don’t expect to see the current trend towards strategic technology partnerships running out of steam any time soon.