As global e-commerce sales continue to grow, businesses are starting to reexamine their approach to fraud prevention, compliance, and how to build these management systems for scale. Forter COO Colin Sims recently sat down with George Peabody from Glenbrook, an independent payments industry strategy consulting and research firm, to discuss how fraud management has changed and Forter’s approach to protecting its enterprise-level clients.
From Legacy Fraud Stacks to Modern Fraud Protection
With emerging consumer and fraud trends constantly evolving, legacy fraud stacks cannot keep pace. An uptick in consumer shopping via multiple channels and the growing sophistication of fraudsters’ methods of attack mean businesses need a new approach to fraud prevention.
In the past, Sims comments, businesses often would see incidences of fraud on their platforms and build in-house fraud pattern recognition mechanisms to stop fraud with brute force. This would be done by merchants writing in either flags or blocks to label the patterns they see. Internal teams would then manually review these flagged transactions and accounts.
This ultimately leads to a retrospective fraud prevention approach rather than a proactive one.
These systems also require an enormous amount of resources to maintain with ongoing adjustments and rule definitions. As such, merchants find themselves investing more in their systems, notes Sims, but not investing in things that provide operating leverage that will scale linearly with their volume. Merchants ultimately need a more dynamic approach to meet evolving trends and anticipated business growth.
Likewise, as new regulations appear in the market, including the General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA), the Revised Payment Services Directive (PSD2) and Strong Customer Authentication (SCA), a legacy approach is not nimble enough to meet these shifting compliance and privacy requirements.
New Fraud Vectors Require a Modern Solution
Account-related fraud continues to be on the rise, including loyalty program fraud which increased by 89% over the last year. Account-based fraud and abuse is an increasingly popular method of attack. Legacy systems are not capable of understanding the actors behind transactions or addressing vulnerable touch points in the customer journey beyond the point of transaction.
Forter’s integrated fraud prevention platform, based on an understanding of personas, is extremely accurate in detecting criminal activities even when cloaked behind an account with a good reputation. Where legacy systems use machine learning to help upgrade their systems, this technology is not a silver bullet. With fraud, the things you’re trying to project are needles in haystacks, says Sims – machine learning is good at automating things, but not at finding needles in haystacks. Instead, a more sophisticated approach is needed.
Forter’s approach combines the benefits of machine learning technology with the continuous curation of data by teams of data scientists and proactive fraud research. This approach is unique in that our solution aims to help businesses expand into new markets and product offerings, all while diminishing the negative impacts fraud and abuse may have on them. This approach requires a custom implementation and ongoing feedback with each merchant. This partnership creates a truly unique and customized fraud prevention solution that addresses each business’ specific fraud and risk tolerances, business growth objectives, and customer experience expectations. The sum of these parts creates a proactive fraud prevention solution that is able to identify nefarious actors before they strike.
As Sims comments, “Tomorrow’s problems will not be today’s problems.”
Listen to the full podcast here for more insights from Colin’s conversation with George, and to find out how to take your fraud prevention solution into the next decade.