October 2015 may seem far away, but for U.S. merchants and card issuing banks preparing to meet the deadline for the EMV chip-and-PIN migration, it is rapidly approaching.
While the migration is expected to cost around $10 billion, according to Aite Group, and retailers are working overtime to meet the EMV standard by the deadline, it is expected to yield significant benefits to consumers, merchants and banks. The EMV standard, when implemented, should make card present fraud virtually obsolete in the U.S. as it has in the other countries that have already adopted it.
But with all of the advantages come some red flags. Fraudsters never rest. While EMV will offer more security for point-of-sale transactions, there will be a rise in other types of fraud including card-not-present (CNP), application and account takeover fraud, as fraudsters look for new ways to beat the system.
Although the merchant community is focused on updating hardware to prepare for the EMV migration, they also need to prepare for an influx of fraudsters online – otherwise they will not gain any ground.
Merchants should consider the following factors in order to prepare for this rise in online fraud:
Don’t Burden the Consumer
Fraud prevention cannot add burdensome steps for the consumer. For example, consumers should not need to enter personally identifiable information (address, phone, email, etc.) multiple times to authenticate their identities. It should be integrated it into the checkout process. The experience must remain friction-free if merchants hope to maintain and improve customer conversion rates.
Dig Deeper Into Identity
Applying predictive analytics provides a greater level of insight into each customer without adding friction to the customer experience. Using this approach to extend what we typically think of as an identity and scrutinize every element of that identity delivers an accurate, up-to-the-minute assessment of fraud risk.
Utilize Device Data
Combine identity information with device data Solutions that look into the billions of devices for hundreds-of-millions of credit-active Americans can more accurately identify the high-risk transactions that warrant manual review. Device data can be collected during the online experience without the consumer having to enter information. This complete view into online and mobile transaction fraud risk helps to maximize conversions and reduce false positive without increasing chargebacks.
Update the Rules
Consider attributes which deliver granular, real-time risk insights into online transactions so that merchants can develop more effective rules-based strategies. The most comprehensive solutions provide specific answers to crucial identity-related questions, including confirmed fraudulent behavior, demographics/mode of living, online profile, online shopping, pattern, relationship, velocity and validation. This critical information enables online retailers to enhance custom models and improve the accuracy and efficiency of manual reviews.
With these measures in place, merchant can create a safe, well-lit, friction-free online store. Taking these proactive steps now will provide them with accurate, real-time information on any online transaction to help more effectively determine fraud risk while providing a frictionless customer experience that won’t compromise conversion rates.
Aaron Kline is the director of eCommerce at ID Analytics, a leader in consumer risk management with patented analytics, proven expertise and real-time insight into consumer behavior.