Across the globe, more and more people are shifting to digital channels rather than traditional channels (such as the branch or store) to shop and manage their finances. This change in consumer behaviour has led to higher online transactions – and with it an increased risk of fraud.
This challenges organisations to strike a balance between increasing revenue and preventing fraud losses. Moreover, in this era of technology driving an increasing reliance on a variety of internet-connected devices for everything from banking, shopping to entertainment and media, creating good customer experiences while preventing online fraud are constant business challenges.
The domino effect of fraud
When it comes to fraud, different sectors, such as banks, telecoms and e-commerce are more interdependent than you might realise. Online banking and e-commerce are dependent on the internet provided by telecom operators, and e-commerce is supported by transactions that are funded by banks, either through credit cards or from current accounts. That’s why fraud in one industry vertical can have a domino effect on the other industries – creating a chain of events. Largely, these verticals despite being highly interdependent – are still not closely interconnected. This means that currently there is a time gap between identifying a suspect fraud, to labelling it as confirmed fraud. By the time the fraud is confirmed, the damage is already done, and done so simultaneously across the different industries.
Are your current processes effective enough?
Identifying suspect frauds and hidden fraud rings in both existing and new customers requires highly innovative technology and advanced mathematical and logical linking algorithms. These different sectors are in respective transition phases to realise the future outlook of increasing online customers and transactions and the impact of online fraud on their businesses. Therefore, now is the time to evaluate business requirements, and to deploy innovative and advanced fraud prevention solutions that prepare the business for the future.
Fraud is not a single event
It’s important to realise that fraud doesn’t happen in an instant, it has a life cycle that begins with an exploit, for example, via social networks, email, malicious advertisements, and even Over The Top (OTT) communication tools. And once the user’s device is infected with malware, the compromised account is sold in the criminal underground market to someone who will actually execute the crime. Then the fraudster will survey the account, and at the right moment, they will capture the funds.
Malware detection plays a critical role because it helps in detecting future fraudulent activity at an early stage. If it is known which accounts are compromised by malware, the company can work with its customers to take proactive action to stop the fraud life cycle before funds are actually stolen.
Customers with no information on credit bureaux
A majority of banking and telecom clients are indecisive about a particular segment of customer applications with no information on the credit bureaux. Since these customers have no credit history on the bureaux, there is no bureau score available. The banks and the telecoms under pressure to grow their customer base approve these customers since there is no negative information available, however, if those customers subsequently struggle to manage their finances or become fraudulent, companies can incur huge losses.
There are a growing number of customers favouring internet shopping over traditional instore shopping, online and mobile banking and transactions are increasing as are the sales of smartphones and tablets. Whilst this trend is paving the way for an accelerated growth in retail e-commerce, organisations are struggling to keep pace – resulting in higher risk and exposure to online fraud.
In addition, businesses are challenged by a smarter generation of hackers and fraudsters. That’s why organisations need sophisticated fraud prevention tools equipped with advanced analytical models that can process high volumes of transactions in the quickest possible time. Moreover, these tools need to be flexible,innovation and able to set new rules over time.
For more information about Experian’s online fraud prevention solutions please contact us today.