Published: February 24, 2020
Reading time: 2 minute read
Written by: Kayla Parker

Forter recently attended the Merchant Advisory Group’s (MAG)  in Atlanta, Georgia. Leading technology providers gathered to discuss innovative uses of new technologies, such as Artificial Intelligence (AI), machine learning, authentication, biometrics, blockchain, and how to create a more frictionless customer experience.

Forter COO Colin Sims appeared on a panel moderated by Justin Staskiewicz from Whataburger, alongside two other colleagues from the fraud prevention space. The panel discussed how online criminals continue to find avenues for new vectors of fraud, even as new systems are put into place to prevent it. How can merchants help their businesses stay one step ahead of opportunistic fraudsters to better their assets?

The Evolution of Fraud 

Fraud is a constantly evolving economy with no silver bullet for prevention. As such, merchants require a nimble fraud prevention solution that is able to stay one step ahead of emerging trends and methods of attack. Sims commented, “With fraud, you never quite solve the problem, because you have a real-life opponent that is constantly adapting. It’s more like a game of chess that requires proactive oversight into what the next move may be.” 

Fraud is evolving, and so is the manner in which consumers are interacting with their favorite brands. Whether from their desktop, mobile device, or at the physical store, customer expectations have grown. Instant gratification is the new norm which means that merchants cannot tolerate fraud prevention systems that slow down their customers’ ability to shop.  

Siloed data or fraud stacks that combine a variety of tools and vendors to fight fraud will lead to friction-filled, inaccurate results for merchants. 

Fraud Isn’t Just for Fraudsters Anymore…

While professional fraudsters continue to exploit merchant systems, a new kind of fraud and abuse is also on the rise — so-called “friendly fraud.” Friendly fraud refers to the misuse of a merchant’s policies by good customers. These types of behaviors are often harder for merchants to accurately distinguish from targeted fraud and abuse. This abuse of policies also depends on the merchant’s threshold for acceptable levels of abuse when weighed against the lifetime value of each customer. 

According to Sims, “preventing friendly fraud has to be a part of the merchant strategy.” 6.2% of returns are thought to violate merchant policies. If the proper precautions are not in place, merchants stand to lose. “There are no downsides to friendly fraud for the customer, so merchants have to prepare for it, said Sims. 

Merchants need to take a more holistic perspective and understanding of the potential fraud and abuse risks for their business. Striking the right balance between enhancing customer experience, while ensuring that their business is protected from all forms of fraud and abuse, is essential.

2 minute read