LAS VEGAS -- Combating fraud is one of the biggest concerns for retailers—if not the top challenge.
“We talk more about fraud today than we’ve ever talked about,” said Sherrill Kaplan, vice president of digital marketing and innovation for Dunkin’ Brands, at a panel session at Money 2020. “It’s like Whac-a-Mole; you solve one problem and a new one crops up immediately, the next day.”
Denis Bouchard, head of payments for The Wendy’s Company, said he now has two fraud analysts on his team—something that earlier in his career in the quick service restaurant sector he would have never thought he’d need. “But apparently, after the fraudsters spend their long, hard day ripping off Walmart and Best Buy, they have a hankering for a Baconator,’ he joked. “But with that view, and all of the mobile and in-app payments getting bigger, we just have to pay more attention to it. That’s why we have our own fraud team. It’s critical to our business.”
Mike Braatz, chief product officer, ACI Worldwide, added that retailers are expanding their security efforts overall. “Merchant fraud teams are growing, and I think bank fraud teams may be shrinking,” he said. “That says something about the shift in liability and the shift in the whole ecosystem.”
Ben Kaplan, group vice president of CashStar, of the Blackhawk Network, noted that there had previously been a notion that prepaid cards and mobile apps, which make up a lot of retailer’s business, are not frequently subjected to fraud. “The reality is they have high fraud,” he said. “Account takeovers and all of those same problems that you have elsewhere become very important in mobile and prepaid. The crooks will find ways to infiltrate that.”
Furthermore, today’s cybercriminals actually target innovation, Kaplan said. “As you innovate, they know it’s new, and that’s what they’re going to be drawn towards,” he said. “They know that there are going to be things you haven’t thought of.”
Because the threats are evolving, so must the tools that retailers use to protect themselves. Nearly 100 percent of the security protections that ACI offers merchants are now cloud-based. “They’re looking to get that risk out of the data centers and into partners that have what we’ll call ‘payments-grade data centers,’ where they’ve designed everything to secure that data in a way that it deserves to be secured,” Braatz said. He added that retailers need to make sure that fraud capabilities are integrated right into the payments stream. “It can’t be an afterthought; it has to be part of the process.”
Additionally, while the growth of in-app payments has allowed retailers to gather more data on the customers to serve them better, that data can also act as a fraud deterrent. “It can be very useful at pinpointing what’s good behavior and what’s bad behavior—applying things like machine learning and behavioral analytics,” Braatz said. “That’s really where our customers are having the biggest success, is taking advantage of all that data.”
Security over convenience
One reason why many retailers may be hesitant to increase security protections is because they don’t want to inconvenience their customers. In a separate session, representatives from Paysafe revealed the results of a fraud survey conducted on both consumers and online merchants. What they found was somewhat surprising.
“We surveyed thousands of consumers and hundreds of merchants to better understand one of the fundamental questions that is typically asked. And that question is, ‘What is the right balance between security and ease-of-use?’ And typically you’d hear that the consumers are suggesting that for them, the most important thing when they’re transacting is to minimize friction—to make it as convenient as possible, without any barriers,” said Danny Chazonoff, chief operating officer of Paysafe. “That would be the natural thought.”
However, Paysafe’s research found that at 25 percent of consumers have experienced some level of online fraud, and half of them agree that fraud is one of the most inevitable actions or behaviors that can take place during a transaction.
Most importantly, 58 percent of consumers said they would accept additional security measures at the expense of convenience. Fully 65 percent said that two-factor authentication appeals to them. “With respect to Equifax, it’s obvious that this is front page news, and consumers are aware of what risks are out there and therefore appreciate merchants taking steps to protect them,” Chazonoff said.
Meanwhile, only 36 percent of the merchants surveyed believe customers will accept much tighter security at the cost to convenience.
“Merchants were thinking that two-factor authentication and biometrics would be too heavy and would create too much friction for the consumer, but in actuality, the consumer is looking for more protection, more security and is willing to sacrifice a little bit of the convenience in order to ensure that the transaction is handled properly, securely and appropriately,” Chazonoff said.