Fraud prevention and payment optimization are two areas of digital commerce that have largely remained separate. However, in recent months, many fraud teams have reevaluated their payment optimization strategies, incorporating fraud prevention to create the best customer experience possible. This piece explores trends emerging in both fields and highlights eight approaches for enhancing payment optimization strategies.
Recent Trends in Payments and Fraud
We’re seeing several trends that digital commerce businesses should pay close attention to:
- More consumers want varied payment options: An increasing number of shoppers expect retailers to offer multiple ways to pay for purchases. Over 26% of 2023 Trust Premium Report respondents said limited payment methods negatively impacted their shopping experience.
- False declines are on the rise, especially in the U.S.: Nearly 40% of global respondents said they have been falsely declined when making an online purchase within the past three months, and 15% have had their payment wrongly denied on multiple occasions.
- Fraud continues to be a serious problem: While many companies have implemented effective strategies for combating fraud, fraud attempts continue to plague digital commerce businesses. A retailer research report by 451 Research found that 58% of merchants have experienced an increase in their overall fraud volume, and 48% said fraud losses are among their top concerns.
Improve Payment Optimization
Digital commerce companies have many options when it comes to improving payment optimization, such as:
- Offer customers varied payment options: Optimizing payments should include providing various payment options. If a retailer only accepts credit or debit cards, it will alienate many shoppers. The ideal payment experience includes alternative payments such as digital wallets, mobile payments, and BNPL.
- Tailor payment methods for each customer: Retailers should use all the data they have on each customer to provide them with an ideal payment process. For example, most German consumers prefer BNPL, but some prefer paying for purchases with debit cards or digital wallets. Offering the customer’s preferred payment method by default will improve their shopping experience.
- Reduce false declines: Consumers don’t like getting hit with false declines. Online platforms should use tools that look at the identity behind each transaction and can distinguish between legitimate customers and fraudsters. Fewer false declines mean more customers will have a good payment experience.
- Screen for fraud before authorization: eCommerce companies can improve the quality of payment transactions by screening for fraud before authorization, weeding out bad actors. When companies address fraud before the payment goes to the processor, it boosts trust with the issuer and can lower processing costs.
- Deploy EMV 3DS intelligently: 3DS requires customers to complete additional steps to verify their identity. Some companies apply 3DS across the board, which means every customer will experience unwanted friction. Using 3DS selectively will improve the payment experience for legitimate customers while adding friction only for risky transactions.
- Automate fraud prevention and payment processes: Digital commerce businesses should consider automating fraud prevention and payment processes where appropriate. For example, Forter’s decision engine uses AI to make accurate real-time fraud decisions. Most fraudsters commit fraud faster than a manual review team can handle. Automation allows online platforms to assess transactions and risks automatically.
- Choose a fraud prevention vendor with a holistic view: Fraud occurs across the entire customer journey, not just the point of payment. Also, eCommerce businesses face many types of fraud, like account takeover (ATO) and card testing. They should look for a fraud prevention partner that views fraud holistically, assesses the risk at points across the entire shopping journey, and can protect against many different types of fraud.
- Work on trust-building: Trust is crucial in fraud prevention and payment optimization. When eCommerce companies don’t trust legitimate customers, it often leads to false declines. Most consumers are willing to spend more with brands they trust, what we call the Trust Premium. Retailers need to work on trust-building to reduce false declines, which means more happy customers and increased revenue.
Many of these approaches focus on the convergence of fraud and payments, which digital commerce companies should consider when creating a payment optimization strategy. Ideally, every company looking to improve payment optimization would utilize all these approaches. However, applying only some of these methods can significantly help boost payment optimization.
Fraud Prevention and Payment Optimization Go Hand in Hand
Today, payment experience equals customer experience. The trends we’ve highlighted show that fraud prevention plays a crucial role in payment optimization and the overall payment experience for consumers. Online businesses must incorporate fraud prevention into their payment optimization strategies to provide customers with an unparalleled shopping experience.
Want to learn more about leveraging fraud prevention for payment optimization?