How fraud prevention can influence the online customer experience

As anyone working in risk management can easily attain, the no. of online threats that can derail a positive online customer experience can be vast and affect a company not only financially but reputationally. To combat these risks, it is therefore essential for businesses involved in digital goods and services to provide customers with the confidence to use their services, all while protecting their accounts and personal information. But how can you achieve a positive online customer experience while having advanced fraud prevention in place? As part of The Paypers Fraud Prevention in eCommerce Report 2022-2023, Nethone's CDO, Maciej Pitucha, was interviewed, delving into how machine learning-powered fraud prevention, can not only stop fraud from being committed but vastly improves the entire online customer experience from start to finish. Read the full interview below.

As part of our fraud prevention efforts, we monitor and check four user journey stages. The first step regards user acquisition, where consumers get in touch with the product, service, or brand. For us, it’s relevant to know the interaction channel – browser or mobile (Android and iOS) – and the users’ true intentions. We usually detect high levels of bot activity at this stage.

"The synergies between our products enable us to detect risks, offer end-to-end protection, and provide risk-based KYC in the same solution."

The second step is ‘login and registration’, meaning the user has entered their details (name, address, email, etc.) and is ready to start shopping. Recurrent user logins are also checked for fraud. After this, the customer completes the transaction through the checkout process. In several instances, the fourth stage occurs when consumers initiate transaction disputes asking for refunds.

The issues that are most likely to arise are related to fraud and UX. A cumbersome authentication process can alter or stop the buying journey and make consumers take their business elsewhere. So, there is a hassle for the consumers, but also a loss for the merchant. The image below illustrates the most prevalent types of fraud that can occur at each stage in the user life cycle. Some of them, such as account takeover (ATO), identity fraud, or synthetic ID fraud, primarily affect the end user.

Consequently, the problems above also affect merchants. Moreover, eCommerce businesses are also faced with affiliate fraud, ATO, promo and policy abuse, return fraud, and first-party misuse. These types of fraud are common in the industry, so we are not dealing with a new phenomenon, but rather with a persistent one that carries severe consequences beyond friction and false positives.

Besides revenue loss, ATO can lead to a damaged brand reputation. Promo and policy abuse can force merchants to tighten the rules, thus, discouraging loyal customers from shopping with them. Chargebacks and first-party misuse are not only about paying fees associated with disputes, but about being subjected to card schemes monitoring programmes that come with hefty penalties.

Our presence at every step of the user journey enables us to address each type of fraud along the way. Thanks to a modularised approach, we are also flexible enough to meet specific challenges that eCommerce businesses fight with. For example, eCommerce merchants can take advantage of SCA-related exemptions to optimise their payment processing setup, resulting in higher conversions – if we determine a transaction is safe, 3DS is not required.

Moreover, to spare merchants from dealing with chargebacks, we activate our early chargeback notification alerts (powered by third-party providers); if we detect fraud, the transaction is simply rejected, and in case of legit requests, merchants can quickly refund the consumer, so no dispute is necessary.

The synergies between our products enable us to detect risks, offer end-to-end protection, and provide risk-based KYC in the same solution. Any business that requires thorough ID verification of their users can encompass fraud detection, KYC, and AML, under one API. In response to the risk assessment that we undertake, the user is guided to either a hard or a soft check. The key benefit we’re offering here is that the journey stops when fraud is detected. For instance, in the case of bot detection, we don’t recommend further KYC checks, thus saving time and money for our clients.

Behavioural biometrics keep the balance between user convenience and protection. Device movements are analysed in the background, and we can detect anomalies and bot activities in real-time. Yet, the most valuable aspect is determining where the suspicious behaviour comes from, so one can proactively act on any attack targeting their business. Our intelligence team frequently explores the dark web to discover new signs of fraud based on behavioural biometrics. Fraud can be sophisticated, but is also characterised by cheap and unskilled labour, such as click farms.

Apart from the flexibility that it offers to businesses looking to employ just one or multiple parts of the entire product, a modularised approach is, indeed, capable of customising the user journey through a fast and safe path toward the checkout.

See the original interview in The Paypers Fraud Prevention in eCommerce Report 2022-2023, which you can read online.