As e-commerce has evolved and new demographics have embraced digital transactions, the threat of fraud and the way firms combat it has also had to be adapted.
Forter’s Aaron Begner spoke to PaymentExpert on why an effective fraud strategy is so pivotal for merchants as they maximise engagement and ensure they aren’t turning away genuine customers.
Providing background on Forter, Begner commenced the discussion by stating: “So, fundamentally Forter has a mission to develop a global ecosystem of trust. So, we offer a fraud prevention platform that leverages what we believe to be the largest network of international online retailers, and our platform is built on machine learning capabilities and optimised by an elite team of analysts and engineers who work out of our R&D centre.
“The result is a suite of solutions that we provide to both merchants and payment organisations, the impact of which is to eliminate fraud and abuse, so we supply real-time decisions with optimal levels of accuracy at every customer interaction. And that’s the key part of our differentiation. And for companies, fundamentally, it means they can deliver a trust-based experience to their customers.”
He went on to outline how the evolution of e-commerce has accelerated in the past year, with the digitalisation of retail taking centre stage for many firms.
“It was obviously a crazy year for e-commerce. I know the data tells us that there was a huge increase in online demand. So we’re seeing online e-commerce double the levels of pre-COVID, and it’s brought with it new kinds of shoppers.
“The first is new shoppers to sites that they had never been to before. And, the second is the shoppers that hadn’t really engaged in the e-commerce channel in the past.
“Importantly, it appears to us that the shoppers are here and they’re here to stay, the impact that we found for e-commerce merchants, is that fundamentally your online store is now the flagship for what might have been a brick and mortar store in the past.”
“It’s now all about the online and the digital channels, so you have companies who had perhaps digital transformation plans. Over the course of five years, and they’ve now had to take those and deliver them in five months.”
In its bid to elevate the way merchants combat fraud, whilst also ensuring that users maintain the most efficiency within their customer journey, Forter recently unveiled its NUMO concept.
It’s something Begner underlined as a potentially pivotal offering in terms of maximising consumer engagement and being severely impacted by false positives when it comes to recognising fraud.
He stated: “NUMO, which stands for ‘new user missed opportunity’ is a new concept that Forter has developed analysis around. And, it really focuses on something called false positives for new customers to your site. So, the false positive is fundamentally a lost legitimate transaction, that stems from a decline that a company makes because they can’t get comfortable with who’s making the transaction – they fear the risk. And what we know is that the cost of that kind of decline is up to 75 times the cost of actual fraud itself. So tackling the false-positive challenge is a must for organisations.
“Where new users are concerned specifically, it’s vital because for organisations to grow, they need to develop their customer base and create lifetime value. They need to recover the costs of acquiring customers that they invest in at the beginning, and this is done by converting transactions at a very high rate and the concept of NUMO and ‘new user missed opportunity’, and from the report that we’ve developed the data shows false positive chat that the false-positive challenge is far more acute with first-time buyers.
“So, a first-time buyer is five to seven times more likely to get declined. And in 40% of those cases, unlikely to return. And this is a cost, both to the organisation’s themselves in single transactions but then also in lifetime value and it’s a cost that is a cost to the market, hundreds of millions of euros of revenue. So that’s the concept of NUMO and the pain point that we’re trying to raise in the market.
“There are a couple of considerations in association with NUMO. There’s the merchant view as, as the company sees the challenge of NUMO. And then there’s the customer view. And so if you imagine as a merchant, the challenge of NUMO is that new users are much harder to identify for a merchant so they represent a much riskier customer base.
“When you think about the gaps they have, there’s a lack of data, if I’ve never seen someone before, I don’t know who they are. I don’t necessarily know their behaviour as a merchant if all I’m looking at is my network of data, then I have limited access to personas.”
He then highlighted that Forter’s expansive ecosystem of data can be vital for fraud detection and recognising legitimate consumers in a more efficient and impactful way.
He added: “Whereas a merchant is limited to the data that they have, they don’t have the ability, in the absence of tapping into a network like Forter’s to really access personas beyond my own limited capacity. So that’s the second concern. And then you just have the model of fraud management that was typically used – the legacy model, which is very heavily rules-based -and those kinds of models are static. They’re not dynamic models, they can’t adjust to new patterns of behaviour in user activity. And that’s, That’s the huge challenge.”