Filtering the Fraudster: Building a Picture Using Big Data
In our new Insight Paper, we focus on how merchants can build an effective fraud filter for their sales funnel – one that is not over-restrictive, leads to genuine sales being accepted, and prevents genuine fraud. Get the balance right and merchants stand to improve their checkout conversion rates and boost their bottom line.
But the right balance – and being able to build an effective fraud filter – requires merchants to first see fraud to understand what their fraud looks like, and to recognize how fraud differs from genuine transactions.
Start with data
Through using a wealth of data—based on thousands upon thousands of transactions—merchants can build a picture of both fraudster and customer behavior, which helps to establish the context for fraud management.
The best data solutions dig deep into every transaction, gathering intelligence from every conceivable data point. Payment providers and merchants need systems capable of capturing and collating these massive amounts of data, so that it can be analyzed for trends, even as those trends are still emerging or evolving.
The data that one merchant gathers can be used to sketch out patterns within their customer base, but is also critical to building rich intelligence and a good understanding of emerging fraud trends within – and across – market segments and geographies. This can only be achieved through constantly updating fraud management systems with information from both internal and external sources, including hot card files, chargeback data and information traded on the dark web.
Fraud exchange services can also play a valuable role here — connecting merchants and issuers in a multi-directional information exchange, which boosts the ability of all parties to make accurate and informed decisions.
The richer and more intelligent data becomes, the more accurate, effective and efficient fraud detection strategies become. This in turn reduces the impact on genuine customers and checkout conversion rates.
Leveraging data with machine learning
Machine learning applies pattern recognition techniques to transaction data, from both fraudulent and genuine transactions, to build algorithms that can predict the probability of a transaction being fraudulent. These predictive models, with their ability to extract meaning from complicated data, can identify patterns too complex for humans or automated techniques to flag.
Machine learning, and its ability to crunch huge data sets, is complementing more traditional fraud indicator tools. And when machine learning models are correctly ‘trained’ (using mass amounts of relevant transaction data) and configured correctly by experts, these techniques can be used to block fraud behind the scenes, invisible to shoppers, with no harm to conversion rates.
By more accurately pinpointing fraud, machine learning models also help to support better conversion rates, by reducing false positives and ensuring genuine customers do not get unnecessarily declined or delayed by manual review processes.
Because machine learning models learn from experience, they can struggle to spot monolithic events, and can underperform when customer buying patterns suddenly move away from the norm. It is therefore important that machine learning forms just one part of an overall fraud management solution, just as expert human analysts remain critical to interpreting and acting upon the wealth of transaction data now available.
For more advice on managing fraud and sales performance, download our new insight paper, ‘Driving Up Conversion with Effective Fraud Management.’
Related Blog Posts
German Gamers Present Conversion Challenges for Game Publishers
Gamescom, one of the largest gaming shows in the world, is set to kick off in Germany in just a few days’ time – the perfect time to delve into some of the current trends in gaming that are revealed in our latest benchmark survey with Newzoo – and a chance to look at what sets German gamers apart.
Positive Profiling Makes Everyone a Winner in Gaming
Online gaming is one of the fastest-growing segments within the broader entertainment industry. With 2 billion active gamers worldwide and 200 million people playing games on social networking sites at least once a day, it is no surprise that the market is now worth well over USD $100 billion per year.
Top Tips to Battle Payments Fraud in Gaming—From a Millennial Gamer
The gaming industry, from a consumer point of view, has evolved dramatically over the last 5-10 years. The buying process has rapidly changed from a one-time, final payment – often at a physical store for a physical product – to a series of never ending bundles, boosters, skins, downloadable content and in-game currency sales!
Turning Impetus into Action: Real-Time Payments in ASEAN
Financial institutions across ASEAN member states are increasing investment in payments, with 64% planning to increase investment over the next 18-24 months, compared to 56% in the broader Asia region and 53% globally. With investment in ASEAN outpacing the global average, the “2018 ASEAN Payments Insight Survey” shines a light on the key drivers for increased payments investment and the expected benefits.
Instant and Digital: The Next Frontier of Bill Payment
We’d all like an inexpensive, simple and consolidated way to pay our bills, and we’re seeing a growing list of upstarts entering the market to meet this need. Customer interaction during the billing process is a critical touchpoint to maintain relationships and potentially enhance the customer experience, but third-party solutions that offer enhanced ease of use could get in the way. Companies need to respond with an engaging bill pay offering, which includes real-time payments.
Working Up An Appetite for APIs in Australia
This week ACI hosted the latest installment of our #paymentsforbreakfast forums in Australia, with the early birds catching the open banking worm in both Sydney and Melbourne.
Given the similarities between the Australian and UK open banking movements, we enticed ACI’s UK-based Lu Zurawski (Solutions Practice Lead - Retail Banking) to Australia to share his learnings from being heavily involved in the UK Open Banking working group.
ACI Watford runs first Coding for Girls Camp in Europe
The ACI Watford Office recently teamed up with local West Herts College to run its first Coding for Girls Camp in the UK. The free, one-day event was designed to introduce girls from year (grade) 7-9 to the world of technology, offering a crash course in computer programming; including HTML, CSS and Java. I spoke to Melissa McKendry, VP of retail banking implementation services and Watford Site Leader at ACI, to find out more.
Online Retailers Are Fighting Account Takeover Fraud Fires
Online merchants and retailers are facing an ever-growing threat from account takeover fraud, which is accelerating within the card-not-present space. Account takeover occurs when user credentials for a retailer’s website are compromised, leading to exploitation of a consumer and potentially offering a large return on investment for the fraudster. Per research from ACI Worldwide and Javelin Strategy, this type of sophisticated attack accounted for a staggering USD $5 Billion in fraud losses in 2017 alone. The card-not-present environment, due to anonymity, allows a fraudster to hide themselves in the act.
Modernizing Cross-Border Transfers with SWIFT gpi
The customer experience for domestic payments – retail and corporate – has recently undergone a complete transformation. There’s still plenty more that could be achieved, but the advent of real-time payments in combination with open APIs has seen the launch of Request for Payment services and direct eCommerce instant payments in the UK and Europe. And it’s not just the PSD2 push in Europe that’s driving change – in the U.S., Zelle is moving beyond standalone P2P payments to become an integrated part of the retail banking app experience, as well as being included in new kinds of corporate disbursements.
Payments in Gaming: The Female Gamer Powers-Up
The global games market is booming, with revenues set to reach USD $137.9 billion by 2021. But along with the growth, gaming is also transforming and diversifying; in genre, gaming devices, platforms, economics and demographics. Notably, female gamers are ‘powering up’ – representing 40% of paying gamers across all platforms – and there are implications for how gaming companies deliver their products and the role of payments in the overall customer experience.