Criminals have been provided with a boost as a result of the pandemic. When many retailers closed their physical locations, consumers who may have otherwise not used digital commerce have been forced to make the switch. Since these new adopters are comparatively inexperienced in the digital world, they are particularly vulnerable to scams and fraud.
A study conducted by UK Finance recently found that U.K. consumers were defrauded of more than a billion pounds in 2020, noting that there was a positive relationship between the increase in online shopping and fraud.
E-commerce is becoming king. What started as a supplement to physical stores, has quickly evolved into a larger part of the retail sector. Helped by the pandemic, U.K. consumer e-commerce spending grew by more than 34% in 2020, now accounting for one in every three purchases.
Perhaps in recognition of this new reality, the 2021 U.K. budget saw the limit on contactless payments increased to £100. While this undoubtedly increases convenience, it also raises issues around security. So, as we move forward into a world dominated by digital and online payments, what can payment service providers do to protect consumers?
Ecommpay data demonstrates that the high levels of attempted fraudulent activity have resulted from three main factors. The first is the knowledge deficit present among merchants with regards to fraud prevention strategies. The second is a laissez-faire approach to online safety by consumers, and the final is the increased level of activity from fraudsters.
To tackle these issues, merchants should ensure they are not disabling any parts of the client or customer verification process, and that they limit the number of payment cards that can be added to one account so that fraudsters do not take advantage and register stolen payment cards.
Payment providers also have an important role in tackling these issues. They must ensure merchants are educated and informed on risks and on how they can improve risk control systems. Further, they should be sure to leverage risk control systems and machine learning to collect and analyze historical transaction data in real-time. This can be used to identify fraudulent patterns and also understand where and how criminals might be linked to one another or victims. Providers will then be able to mitigate risks by identifying potential instances of fraud earlier, allowing for earlier intervention, and for remediation plans to be built.
AI technologies should be combined with expert support to ensure fraud detection is as efficient and effective as possible. Risk control systems experts are important for monitoring suspicious activity flagged by AI technologies, and can then make the decision whether to process or proceed with a transaction.
As we move forward into a new era increasingly dominated by digital payments, all actors involved with the payment’s ecosystem must adapt. The finance industry must inform businesses and consumers on how they can reduce levels of fraud, and correspondingly they must adapt their own behavior. Compliance professionals must evolve to handle the increased volumes of contactless transactions. To assist with this, new technology must be used to ease this burden, preventing human error as a result of fatigue. Companies must work with trusted payment providers who are leveraging new technology to reduce risk. This will go some way to turning the tide in the war against fraud.
