Payments Fraud and Brand Loyalty: Why CXOs cannot pass up AI Risk Management in 2022

Payments Fraud & Brand Loyalty

Payment fraud and data breaches are damaging to your brand. They impact your company’s reputation and turn away loyal customers. Customers you have worked hard to earn. Online payments fraud continues to get more sophisticated. Social engineering, phishing, account takeovers, bots – newer forms are emerging, getting ever smarter. According to CMSPI estimates, merchants in Europe spent nearly €7 billion on fraud prevention in 2021. There is no doubt that fraud is indeed expensive.

So, what is happening?

Weak passwords are a big, big problem. Many customers still use passwords that are easy to crack. In fact, 80% of data breaches are due to this reason. Just look at the data from The National Cybersecurity Center in London – it is astonishing. Their analyses of passwords of hacked accounts found that 23 million people used “123456” as a password. Another 6 million used “qwerty” or “password.” On the other hand, social engineering attacks, phishing, and automated bots are creating newer threats. Identity theft and impersonation – such as CEO fraud, where an attacker impersonates your CEO – are getting more sophisticated. Yet, at the same time, customers demand instant fulfillment, seamless user experiences, and protection of their data from fraud and misuse.

What do consumers expect from brands?

Consumers today expect brands to protect their data. They expect brands to engage and communicate with them and educate them on fraud and safety. Wary customers are getting more cautious about sharing their data with brands. Not surprising, as they fear this info will fall into the wrong hands. But at the same time, customer experience programs need to collect customer data to be effective. And the more data companies collect, the greater the risk. Hence, securing your data is of absolute importance. Every C-level executive has to think hard about how to safeguard their brands, and customers from bad actors, without sacrificing the CX.

How are brands responding to Payments Fraud?

Many merchants are applying strict fraud rules, leading to false declines and turning away legit customers. CMSPI estimates that global revenue losses from false declines will exceed €207 billion in 2022, up 6% from last year. Adopting the right fraud strategy can be a complex issue. Merchants often find themselves caught between setting overly strict fraud rules or risk becoming vulnerable to attacks.

What Must Brands Do?

Fraud prevention can boost your top-line growth, help you expand your business, and delight your customers. Here are a few tips on how to approach the privacy, data fraud, and customer experience equation:

Adopt a Privacy by Design philosophy

In today’s time, the risk of data breaches and fraud is at an all-time high. Brands that focus on the privacy of their customers will have a distinct competitive advantage over others. Incorporate a privacy by design philosophy. It is the idea that privacy cannot be assured just by complying with regulatory frameworks. Brands must design technology and processes keeping data privacy in mind. Data privacy should be a part of your company’s philosophy – starting from the design phase.

Brands must demonstrate they take privacy very seriously, and apply it at all levels within the organization to assure stakeholders. The ones that fail to do so could lose market share.

Protect customers without sacrificing UX

Merchants have to balance robust fraud prevention rules without adding more friction to the user experience. This means addressing all points in the payment flow – from log-in through checkout. AI-based risk management systems help you analyze data from multiple points in real-time and keep payments fraud at bay. They improve your agility when it comes to fraud response and mitigation. Biometric data helps you to verify and secure payments. They reduce dependency on passwords and are much safer. Multi-factor authentication (MFA) and FIDO (Fast Identity Online) use biometric data and should be a part of your fraud prevention repertoire. Use payment tokenization to enable one-click checkouts and keep payment data safe. Ensure you modernize your payment systems and use the most updated tools, including 3D Secure v2.3.

Talk to your customers

Be sensitive in the way you collect customer data. Communicate with users, seek their permission before collecting data, and give them the option to opt-out if they wish. Educate and inform your customers on data security best practices and commit to protecting their data. Keep in constant touch with your customers to update them about changes in company or industry policies so that they can make more informed choices.

The Use of AI – a compelling offer for CXOs?

AI is fast becoming a compelling proposition for CXOs. Research from Gartner highlights the importance of data-driven insights to protect users from fraud. Indeed, more companies are switching to AI-based risk management to prevent fraud and improve customer engagement. AI systems give you real-time fraud intelligence by analyzing large volumes of complex data in real-time. AI algorithms match and correlate data from multiple sources to detect fraud patterns. These systems constantly take feedback to learn new things. This enhances their ability to learn about and detect newer fraud patterns and types of fraud.

Efficient AI systems help you reduce costs by protecting your revenue from hackers, removing the costs related to the manual investigation of fraud. Managing fraud brings long-term cost savings from reduced customer churn. AI systems also help your teams to work more efficiently by focusing on other tasks that need their attention. As fraud evolves, you have to work with the right partners and stay up to date on the latest tools and trends that help you secure your business and customers.

How Can Novalnet Help?

The right payments partner can help you build the best AI strategy that matches your business needs. Novalnet is a global PSP with deep experience in processing payments for the European industry. Many of Europe’s leading brands trust us to handle their payments. Our AI-based risk management solutions and advanced analytics help you securely process payments in a PCI DSS-compliant environment.

We can help you accept payments seamlessly in 125+ currencies in 150+ country-specific payment methods. Our instant plug-ins get you up and running within minutes and with minimal coding.

Reach out to us to know more about how we can help.

Gowri Shankar Balasubramaniam

Gowri Shankar is the IT Application Security Manager at Novalnet with versatile knowledge in Programming and System/Security architecture. Having 11+ years of experience in the financial services industry, Cybersecurity, Payment Card Industry Data Security Standard (PCI DSS). Certified in Advanced Payment Card Industry Security Implementer (CPISI 2.0), Secure Software Lifecycle Professional (CSSLP) from (ISC)².