As published on PYMNTS July 2, 2020

Consumers’ commerce patterns have been very much upended in the past few months and shifted heavily to digital.

On the upside, this digital gold rush has created an opportunity for merchants to push about a decade’s worth of digital innovations out the door in weeks. But the bad news is that fraudsters see a once-in-a-lifetime opportunity to jump into the increased flow of transactions, Gary Sevounts, executive at fraud detection firm Kount, told PYMNTS in a recent conversation.

He added that fraudsters have been showing up across the board in terms of fraud types attempted. Account takeover fraud, phishing scams and friendly fraud have all seen upticks of late.

Sevounts said Kount has also recently noticed an uptick in “card-testing fraud.” That’s where fraudsters take stolen card details and plug them into low-value transactions to see if the card is still live.

Once they determine it is, they level up to the bigger fraudulent transactions. He said part of how card-testing fraud works is the ability to potentially slip transactions by actual cardowners, especially if they routinely see a few thousand dollars in charges each month.

“Those small charges can easily slip right below a customer’s radar, but the fraudster definitely notices the card got validated,” Sevounts said. “Now they can try to hit a big score with a big buy, or perhaps several of them. And if those get through and the product gets shipped, the merchant is out the goods and the money, plus the fees associated with the chargebacks. If this isn’t cut off early, it can lead to big losses.”

In fact, such losses are often just the tip of the iceberg for merchants. Not only do they see a big uptick in fraudulent chargebacks, they run the risk of finding themselves in a dispute management process or potentially even losing the ability to accept certain payment methods.

Fraud Prevention as an End-To-End Journey

Fortunately for merchants, the fraudsters can be defeated with the right data and tools. Sevounts said a holistic look not just at the transaction in isolation but in a broader context can make fraud attempts stand out from their legitimate counterparts. With the right technology partner, merchants have the ability to really mitigate these types of risks.

Systems like Kount’s Identity Trust Global Network use artificial intelligence (AI) to identify both fraud and trust signals. Sevounts said the key isn’t just to stop fraud at the checkout, but to identify the trust level behind each interaction with a consumer on the way to checkout, beginning with the customer’s login.

“Starting from that moment when someone logs on, the merchant can see what the trust level following this individual is,” he said. “And then as they proceed to payment, [a merchant can] very accurately know if it’s a trustworthy interaction or if something is not right.”

The “not right” things can be relatively small — a customer who’s only logged in via a PC suddenly coming from a Mac. Or problems could be very large — a U.S.-based consumer suddenly shopping from a Zimbabwe-based IP address. AI can spot all of those variations and compose a “risk score” that gets passed on to the merchant.

With Kount’s system, the merchant then decides what to do with those scores — reject a transaction entirely or just require additional verification steps.

eCommerce Is Booming … for Scammers

Whatever a merchant does, the basic goal is the same across the ecosystem — let the maximum number of good transactions pass through seamlessly while blocking the bad ones and making the fraudster never come back.

And while the past several weeks haven’t created fraud problems, they’ve increased the urgency many merchants face in fighting the bad guys.

Sevounts said that “the reality is that when companies are making their push into digital commerce and digital business, they’re looking at new models, new geographies, new ways of selling” — all openings for scammers.

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