Utilising digital identity intelligence and behavioural biometrics on top of a multilayer approach to detecting and preventing fraud could be crucial for retailers moving online, according to Kimberly Sutherland, vice president of fraud and identity management strategy at LexisNexis Risk Solutions.
“When companies use a multilayer approach of fraud prevention they have a lower rate of successful fraud attempts and their cost of fraud goes down,” she said, speaking on the side lines of Money 2020 in Las Vegas last week. “But also when they start to incorporate digital identity intelligence and behavioural biometrics capabilities it goes down even further.”
“That really shows the risk signals from a digital standpoint and allows organisations to incorporate them into the processes instead of sticking with the traditional approaches,” she said.
Earlier this year LexisNexis published it’s annual fraud in retail study. In the US, retail fraud attempts have doubled year on year, and tripled since 2017. Increased mobile transactions, more digital goods and services sold, more cross-border transactions, a surge in automated botnets, and a growth in sophisticated synthetic IDs are all issues driving instances of fraud.
The cost of fraud is also rising, with the average total loss at $3.13 per $1 of fraud – up 6.5 percent from 2018. A major hurdle for firms is in dealing with different types of fraud across borders.
“You can’t just take what you’re doing domestically in the US and assume it’s going to work internationally,” according to Sutherland. “It’s crucial to customise the fraud approach for the geography that you’re operating in and the consumers' requirements.”
As more retailers move online, the rate of fraud will naturally rise, but many organisations overlook fraud as a key requirement in building out their online enterprises.
“It’s so much more than just developing a good web presence,” said Sutherland. “You can have a wonderful user experience online but you really have to make sure that you understand the fraud attack vectors, that you’ve balanced the customer experience with the fraud detection side of things.
“One of the challenges may be that companies go too heavy creating the perfect user experience and they forget about how to protect their company against fraud.”
According to the US Department of Commerce, total retail sales in the second quarter of this year totaled $1,361.8bn, with ecommerce sales accounting for $146.2bn. In the second quarter of 2018 ecommerce reached 9.2 percent of retail’s online sales, a figure that grew to 10.7 percent for the same period this year.
“It’s not easy transitioning to start to have an online presence. You can’t just take what you’ve been doing in the physical world and just transport it over to the digital side. Every group that has tried to increase their ecommerce presence and their sell of digital goods has higher fraud.”