Tips for Battling Data Breaches & ‘Fast Fraud’September 16, 2015
With non-physical goods – like ebooks, music, video games, digital gift cards, etc. – transactions occur instantaneously, with little verifying information. These speedy transactions are convenient for customers, but have opened the door to “fast fraud,” which is quickly (no pun intended) growing into a major issue for ecommerce sites. In these types of digital transactions, traditional payment solutions don’t have the verification speed to match the product delivery speed (which is instant). This allows fraudsters to steal and resell digital goods and/or consumer data, creating huge problems for e-tailers. [more] According to the Identity Theft Research Center, (known) data breaches in the U.S. increased 27.5% from 2013 to 2014 – an all-time record. Plus, EMV credit card security measures are becoming more widespread. While this is great news for brick-and-mortar stores, it’s not too helpful ecommerce sites and card not present (CNP) transactions. When scammers start hitting roadblocks caused by EMV security, they are likely to shift their attention to defrauding ecommerce operations. Case in point: CNP fraud rose 79% in the U.K. just three years after EMV adoption.
Beefing up your antifraud efforts should definitely be a priority. While you outline your action plans for combatting fraud, keep these tips in mind:
An in-house antifraud division has its advantages, but it’s also very costly. A third-party security vendor is usually more affordable, and much more experienced – with the benefit of exposure to all sorts of fraud patterns across a variety of clients. However, when choosing a vendor, you should make sure that they have experience working with your particular industry. Longevity is also important to consider; vendors that have been around longer have more data to spot fraud more quickly, or close unnoticed security holes in your system.
Use guaranteed payment solutions
Your payment solutions provider should guarantee their work by assuming all risks from fraudulent transactions they accidentally approve. That way your losses are covered if anything goes wrong.
Don’t forget the user experience
Generally, transaction security and user experience are inversely related. An overly stringent fraud prevention system can inconvenience customers and keep them from following through on a purchase. Always consider how new fraud prevention solutions will impact the customer and utilize A/B testing to find security solutions that have the highest conversion rate for approved sales without making the checkout process inconvenient.