E-commerce: data, a new anti-fraud protection!
Tribune Libre [Free Forum] by Nathalie Schulz, CEO, DQE Software
According to a recent study, Internet fraud costs online retailers an average of USD 14.6 million a year, i.e. about 7.5% of their revenues*. A figure that sometimes includes a loss of profits and the budgets allocated to specialist teams and a number of anti-fraud systems.
Now, when we know that some online retailers, especially large volume e-commerce players, post an operating margin under 5%, we understand that in recent years the fight on fraud has become a strategic issue.
All the more so, when opportunities for growth in the industry are limited by the combined effect of capping the market penetration rate and reduced consumption budgets, in the context of a worldwide economic crisis.
Finding the flaws of a commercial website: the eternal cops and robbers game
Undoubtedly, online retailers are moving forward, adopting a number of security checks, automatic fraud detection systems, checking banking details, cryptograms, etc. In the past few years, scores of technological innovations have been adopted to make online payment secure.
But, when it comes to fraud, robbers are typically always one step ahead of the sheriff. And, being experts at circumventing the law, they always find a security hole. Clearly, if hacking online payment security systems becomes too difficult, the vulnerability must be found elsewhere, usually early on in the purchase process.
In fact, when shopping online, from connecting to one’s account to completing a delivery form, one goes through a number of steps before the actual payment. And, if we are to believe the many tricks available on the Web to safely defraud commercial websites, security vulnerabilities seem to abound all along the order process.
What’s more, these flaws are easy to take advantage of and therefore available to anyone. Indeed, what could be easier than making an actual purchase, and later complain, in bad faith, of the transaction at the bank, claiming identity theft, no delivery or a product not corresponding to the one ordered? This type of fraud is much harder to detect by security systems, and here online retailers are always on the losing end.
Crossing data all along the order process, the best anti-fraud measure
So, how do we fight this constant threat? How do we protect ourselves against types of fraud as diverse as they are increasingly inventive? With reliable, verified data, no longer only at the time of payment, but as early as connection is made, then at each step of the order process, until the completion of the transaction. Indeed, by moving up the security chain, hacking opportunities are reduced.
This need to detect fraud as early as possible in the order process relies on two key steps. The first involves crossing geolocation data and IP address at the time of connection to the user’s account to verify that the buyer is actually the customer, thus guarding against identity theft. The second step consists in verifying the relevance of data captured at the time of completing the delivery form by correcting a postal address or cross-referencing name and address with the reference data.
This intelligence applied to data will also enable us in the future to go further, notably by applying behavioural data to the purchase process, to detect risks of fraud starting from the customer data stored by the CRM during previous interactions with the customer (order history, preferences, average budget, etc.).
Next comes walking the tightrope of achieving maximum security in purchases, via enhanced, even manual, control of vulnerable commands; whilst maintaining the required seamless customer purchasing experience and prompt handling of order delivery, which is the true competitive strength of online retailing.
But when we understand that gaining just 1% on the percentage of fraud means preventing the loss of millions of euros, we soon find our balance! And that’s exactly the promise of this preventive approach in data qualification: turning fraud into an actual source of future profit for online retailers.