Keeping checkout friction low is always an issue for merchants seeking to boost conversion, but even more so during the holiday season, when offers and promotions aim to pull in new customers and drive higher sales. The dilemma is how to keep the UX fast and fuss-free when fraudsters are also eyeing up your payments.

Merchants have always walked a fine line balancing easy access for customers with keeping out criminals, but with accelerated migration to online card-not-present (CNP) environments and new hybrid services (fueled by COVID-related retail trends), payment environments have never been more vulnerable.

More of everything – including fraud

Our latest eCommerce Fraud Index shows that global eCommerce sales increased 15 percent during the first half of 2021, compared to the same period in 2020. Confirming that despite the shift away from strict lockdowns, consumers are still migrating more spend online.

Fraudsters have been keen to jump on the wagon, adapting quickly and targeting new channels like mobile and BOPIS (buy online, pick-up in store) with attacks higher than on other channels. ACI data shows they’re also ramping up synthetic fraud threats with bot attacks, phishing scams and account takeovers – all of which saw a rise in Q1 2021.

Restricting fraudsters without adding pain points for genuine customers

Too many authorization steps, or excessively high rules thresholds can cost revenue and loyalty. If the payment process is too slow and laborious, or the sale is declined because of perceived risk, it can be frustrating for customers who may abandon the purchase completely.  

The industry is optimistic that the new PSD2 strong customer authentication (SCA) mandate will help fend off increasingly sophisticated attacks. But there’s still concern that it may add new layers of friction, making customers as well as fraudsters think twice.

Enter 3DS2, which can satisfy PSD2 SCA while reducing authorization effort for cardholders in online and mobile environments, and provide exemptions for low-risk, sub €500 values. However, work is still needed to understand 3DS2’s impact on the customer experience. Feedback from some merchants that have gone live with 3DS2 show that soft decline rates have increased for some connectors.

Data-led solutions can cut fraud and maintain a smooth UX

Security compliance aside, it is possible to tap into the wealth of data merchants already own to boost security, while controlling friction levels and delivering a more seamless experience to shoppers.

Multi-layered approaches, using AI and machine learning, can help identify threat patterns and head off fraud attempts as they happen. But fraud prevention based solely on machine learning models and consortium data may not be fast enough to keep pace with emerging threats and fraud patterns – especially during peak seasons when fraudsters are ramping up their attacks.

Incremental technology is an innovation that can reduce timeframes and allow for faster response to potential threats. How is this achieved? It continuously monitors features and profiles in data, “thinking for itself” to make predictions, automatically refreshing fraud models in two-to-four hours, and dynamically adapting to new fraud patterns as they happen. This shrinks the window of opportunity for attack, stopping more fraud and minimizing declines for genuine customers.

The added upside is that a better understanding of customers and fraud trends not only helps merchants mitigate risk more effectively, it also maintains a great UX and builds more hyper-targeted and personalized experiences. Perfect to keep seasonal peaks high.

Find out more about this and other ecommerce fraud trends by downloading the latest ACI eCommerce Fraud Index

Senior Principal Solution Consultant, Payments Risk Management

Kieran is an expert card-not-present fraud and payment strategies, working across multiple sectors and markets. A qualified accountant, Kieran understands how to optimize online conversion and revenues within all aspects of eCommerce. Experienced in working with both retailers and vendors, he offers a deliberate and proactive approach to managing people and business issues.