Online fraud is a $4 billion retail problem
We’ve all read of numerous instances of retail fraud, and many of us as consumers have been victims of it. While consumers generally aren’t responsible for the charges, the pervasiveness of it undermines retailer, bank, credit card and e-commerce credibility. With the rise of EMV chips in use at physical stores, fraudsters are shifting some of their focus online.
At last month’s Shop.org, RetailWire sat down with Michael Reitblat, the co-founder & CEO of Forter, a developer of a fraud prevention system, to get his take on what can be done. First, he said, while retailers are normally responsible for fraudulent online transactions, historically they made individual efforts to try and stop it, rather than pooling their resources.
While there is approximately $4 billion in actual online fraud per year, it becomes a $20 billion issue when you consider lost sales, according to Mr. Reitblat. To help retailers manage the problem, Forter has built a system that reviews transactions in real time, and provides a “yes or no” answer to retailers in less than one second. Further, if Forter is wrong, they accept responsibility. Mr. Reitblat says the service analyzes thousands of data elements per transaction to get it right.
He noted that while online fraud is rapidly increasing, Forter relies on dynamic behavior to stop it, versus static information, which is what retailers have traditionally used. The service, in other words, uses algorithms and data analytics to evaluate behavior, people and trends, rather than history. A Forrester study said the ROI on using Forter’s system is 153 percent.
There are numerous companies offering services similar to Forter, including ClearSale, which offers a single solution for web, mobile and telesales. Its system is based on machine learning, rules-based reviews as well as manual reviews and customization to the client’s needs.
With ClearSale, transactions that are suspect often get a manual review prior to a decision being made. This obviously takes longer than basing it all on instant comparison of thousands of data points by computer. Suspect transactions appear as “pending” to the merchant for up to a few hours until a decision is made.
Meanwhile, Mastercard recently launched a new “early detection system” to try to identify suspect cards more quickly.
- As EMV Chips Make In-Store Fraud Harder, Fraudsters Move Online – Forbes
- Mastercard expands fraud prevention offerings – Business Insider
- 10 Tips to Avoid Fraudulent Chargebacks from Online Sales – Small Business Trends
- FAQ – Forter
DISCUSSION QUESTIONS: As fraudsters have turned increasingly to online transactions, how critical is it that retailers employ a multi-layered solution to prevent fraud? What’s the best way to find the right provider?