On-demand commerce demands a fresh approach to fraud
By Felix Eckhardt, CTO, and Piet Mahler, COO, RISK IDENT
As a film celebrating the life of Queen frontman Freddie Mercury hits the cinemas, it is appropriate to consider how the sentiment in the lyrics from ‘I Want It All’ (“I want it all and I want it now”) is impacting ecommerce.
Various studies have proved what most of us already suspected – that consumers are becoming ever more demanding and less tolerant of delays – and the on-demand market in the US has surged on the back of increased consumer expectations. A market that was worth USD 22 bln in 2015 was valued at USD 34 bln by the end of 2017 and analysts expect it to be worth as much as USD 57 bln by the end of 2018.
One of the key aspects of this on-demand culture is the expectation of instant online purchasing power, with consumers taking it for granted that they will be able to bypass traditional online payment security checks and buy something with just one click (or even one voice command) on their computers, tablets, phones and digital assistants.
Walker Sands’ 2017 Future of Retail Report observes that the connected consumer is getting used to voice-based technology and describes the mainstream adoption of voice-controlled devices like the Amazon Echo and Google Home as perhaps the biggest innovation in the connected consumer lifestyle.
According to the report, nearly a quarter (24%) of consumers now own in-home voice-controlled devices, and 19% have already made a voice purchase through Amazon Echo or other digital voice assistants, with a further 33% planning to do so in the next 12 months. Younger consumers are particularly open to this type of interaction, creating new opportunities for retailers and brands.
This trend is set to continue, with Canalys research suggesting that more than 56 million smart speakers will be sold this year – outstripping the growth of any other consumer technology – and referring to ‘strategic attempts to monetise the growing installed base’. According to Gartner, 30% of web browsing sessions will be done without a screen by 2020.
Digital commerce consultancy Salmon suggests that to increase purchasing via voice assistants, trust needs to be built between the user and the device. It says that with regard to the purchase, there are trust issues surrounding selecting the correct product, paying the correct price – with the correct method – and selecting the correct delivery method. Retailers will need to elicit trust by ensuring instructions don’t need to be read out each time, creating personalised responses to requests and improving language skills.
Mitigating the risks: the new approach to fraud
But while instant payments are increasingly a feature that businesses need to provide in order to remain competitive, real-time payments come with the risk of real-time fraud.
In order to minimise friction for customers who expect easy payment action, businesses are looking at requiring less information before checkout and spending less time reviewing transaction activity.
While this is a very convenient solution for trusted customers, it is also a perfect environment for fraudsters. Transactions occur immediately without much (or any) time for red flags to go up or for manual fraud reviews to take place, an opportunity that criminals are more than happy to exploit.
The good news is that businesses have the ability to stay one step ahead of fraudsters looking to take advantage of immediate payment vulnerabilities. One of the most popular and effective tools in the insta-pay environment is an all-in-one fraud prevention software solution, some of which are powered by machine learning.
Just as their pre-machine learning rule-set fraud prevention counterparts were able to do, machine learning fraud solutions perform in real-time. The way they differ from legacy programs is that they are able to utilise the most-up-to-date AI technology to accurately detect anomalies across every transaction and channel.
This allows fraud managers to not only spot and block fraud attacks at the exact moment they occur, but also to seamlessly approve the majority of one-click purchasing activity with extremely low false positive rates.
As with any decision in the payment world, a business must finely balance customer convenience and expectations with risk management. Today’s sophisticated fraud solutions allow enterprises to deliver friction-free real-time purchasing power while keeping fraud risks low.
In the past, complicated fraud prevention implementation and high costs associated with upgrades deterred businesses from exploring the option of fraud prevention advancements.
But things are different at RISK IDENT. Our result-driven products provide a simple process to import and export customer and transaction data and then deliver cost-efficient fraud protection. This keeps a business at the forefront of current and future payment innovations — and that has to be an investment worth making.