There aren’t many surprises in the Association for Financial Professionals’ 2019 Payments Fraud and Control Survey Report. In a nutshell: Payments fraud activity has increased dramatically in the past five years, with 82 percent of financial professionals reporting that their organizations experienced attempted or actual payments fraud last year, up from 62 percent in 2014.1
Of course, if you’re a merchant, you’re no doubt well aware that fraudsters are a threat. The big question is: What should you be doing to protect yourself from payments fraud? The answer is twofold.
First, don’t throw up your hands and do nothing. As the aforementioned survey report notes, fraudsters want to take the path of least resistance. So while it isn’t possible to protect your business one hundred percent, AFP says that “having a variety of protective measures in place will likely frustrate fraudsters and they’ll move on to easier targets.”
For example, if you’re a merchant you’re likely worried about card not present (CNP) fraud and the fees and fines associated with chargebacks. A layered approach might utilize technologies that facilitate the use of both tokenization and machine learning.
You might start by utilizing a service that replaces payment card data with tokens—that is, non-sensitive equivalents that have no value to a fraudster in the event of a security breach. Specifically, you might look to replace 16-digit primary account numbers (PANs) with 16-digit numeric or alphanumeric tokens, while also tokenizing the associated three- or four-digit CVV numbers and expiration dates.
Tokenization offers a number of benefits, in part because tokens are flexible. By utilizing tokenization, you can preserve the format and length of the original data you’re protecting, which also enables business-as-usual processes (as opposed to, say, encryption, which requires keeping keys safe and secure). Tokenization isn’t limited to card data either; in fact, you can tokenize any sensitive data element.
Another advantage is that you can tokenize data as soon as you accept it into your environment. In that way it’s an omnichannel solution and particularly valuable in the age of omnichannel, in which you are likely accepting payments not just at a checkout lane in your store(s), but also via your website and via mobile devices.
Of course, protecting customer data is only part of the challenge you face as a merchant. It’s also imperative that you’re able to detect and prevent fraudulent transactions without blocking valid orders or doing anything that gets in the way of meeting your customers’ expectations. In other words, you need fraud prevention technologies that minimize your fraud risk while maximizing revenue and reducing costs.
So, in addition to using tokenization, you might also deploy a fraud prevention solution like the one offered by Kount®, which leverages two types of machine learning to look for anomalies that are indicative of fraud.
On the one hand, their solution utilizes unsupervised machine learning to consider an enormous amount of global data and uncover indirect links to “bad actors” you would otherwise not be aware of.
At the same time, it uses supervised machine learning that allows for continuous evaluation of results—by you and by the fraud prevention experts at the company—as more and more of your data accumulates over time. In this way, the solution gets smarter as more data gets into the system, providing for and allowing for more informed decisions, which are rendered via Kount’s platform.
So, to take one narrow example, if you notice fraudulent transactions originating from a particular part of the world, you can log into the platform and block sales from that particular region. In that way, the solution is always adjusting—or can be adjusted—to meet the evolving conditions surrounding your business. This is an invaluable benefit in a world in which keeping transactions secure only figures to get more difficult as technology presents us with new devices and new ways to make payments.
If you have questions about any of the above or want to learn more about our suite of security solutions, don’t hesitate to give us a call at (888) 330-3974. We understand the unique operating environment surrounding merchant payments and can help you differentiate yourself from competitors and capitalize on growth opportunities.