Finding Balance and the 360-degree View : How to Reduce Fraud, Stay Compliant and Streamline the Customer Journey
The COVID-19 pandemic unleashed an explosion of online transactions. In the UK alone, online retail transactions grew more than 70% from April to June 2020, mirroring a trend seen across the rest of the world.
While online shopping was a godsend to merchants struggling with pandemic closures, it also afforded fraudsters an unprecedented opportunity. In fact, UK Finance reported that card not present (CNP) fraud in the UK increased 11% from the first half of 2020 to the first half of 2021. And losses add up quickly. Globally, CNP fraud losses are expected to surpass $17 billion by 2023, according to a recent report from Outseer and Aite-Novarica Group.
If potential losses from CNP fraud aren’t enough of a reason for banks, payment processors and merchants to look for solutions that help boost their fraud defenses, Strong Customer Authentication (SCA) is.
In an effort to blunt CNP fraud and enhance the security of online payments, SCA was introduced in 2019. It is a regulatory requirement of the EU’s Second Payment Services Directive (PSD2) and has become a driving force behind merchant adoption of 3D Secure (3DS) for card payments in the UK and Europe. The 3DS protocol adds an additional level of security for authenticating users by requiring a customer to provide two independent authentication elements based on what they know, what they have and what they are.
Although 3DS transaction volumes in the UK grew from 7% in Q3 2020 to 46% during the first half of 2021, the loss from CNP fraud decreased 5% during that period. That is a clear sign that the new protocol is working as intended – and is highly effective at reducing instances of payment fraud in CNP transactions.
But there is a trade-off.
The vast majority of customers are authenticated passively and experience a seamless transaction. Only those transactions appearing risky require an additional level of authentication, often via challenges or step-ups. This adds friction to the customer journey, which is frustrating to both new and returning customers. More friction translates into greater cart abandonment, and ultimately loss of revenue for merchants and financial institutions alike.
More Intelligence, Better Risk Decisions
So how can issuers, acquirers and merchants find the right balance to reliably identify fraudulent transactions while minimizing friction that complicates a customer’s online journey?
Access to more data is a good start. With 3DS 2.0, which expands the scope of the original protocol, merchants can share 150 data points with issuers. That’s 10 times the number of data elements previously available. This additional data, which includes contextual and payment-specific details, helps enhance the 3DS authentication decision and streamlines the checkout process, minimizing step-ups that lead to cart abandonment. The ability to collect contextualized data has contributed to more reliable fraud risk decisions and a reduction of chargebacks within the 3DS transaction flow.
Issuers can further boost their fraud and authentication capabilities with an integrated approach that connects and leverages 3DS, CNP and online banking intelligence. A true 360-degree view of the customer enables trust and assesses risk holistically across the bank, optimizing the balance between a seamless customer journey and fraud prevention.
Integrated for Success
LexisNexis® Risk Solutions and Outseer, an RSA company, have teamed up to deliver an industry-first, comprehensive digital banking and payment solution, enhancing card authentication and account monitoring capabilities through the creation of a single customer view in digital banking.
With LexisNexis®ThreatMetrix® intelligence from the Digital Identity Network and Outseer 3-D Secure, there is no need to choose between strong customer authentication and a frictionless customer journey.
Leveraging the integrated capabilities of ThreatMetrix® and Outseer empowers issuing banks to vastly improve risk decisions across banking channels, combining the partners’ respective industry leading solutions and intelligence. This approach enables all members of the payments screening flow to benefit from enhanced dynamic transaction authentication and risk assessment, reducing cart abandonment and minimizing payment friction – all while still providing a comprehensive level of defense against CNP fraud.
The combined and expanded data generated during risk assessment boosts banks’ online decision making, increases fraud capture, delivers faster transaction authentication (in near real time) and enhances overall customer profiling. Merchants enjoy better transaction completion rates as a result of the streamlined, low-friction customer purchase journey.
ThreatMetrix® offers raw data as well as optimized, scored risk assessments, for greater insight into risk. It supports the entire customer journey from verifying new account openings to authenticating account lifecycle management. Linking ThreatMetrix® with Outseer 3-D Secure provides issuers with a holistic view of customer interactions for more informed risk decisions.
Contact us to find out how LexisNexis® ThreatMetrix® and Outseer can help you access the most comprehensive intelligence, reduce the risk of fraudulent CNP and remote transactions, and streamline the customer journey.