June 29, 2020
Imagine driving a high-performance sports car. Now, imagine driving that same car in first gear on the highway. Technically, it works. But it’s hardly the experience it should be, nor does it maximize the potential of the vehicle.
That’s what it’s like for eCommerce businesses to rely on a subpar fraud prevention solution. In a new paper from IDC Research, analyst Steven D’Alfonso draws the comparison of the sports car in first gear on a highway to both legacy and ineffective start-up fraud prevention solutions that offer too little by way of establishing identity trust through artificial intelligence and robust data.
“Similarly, artificial intelligence (AI)-based fraud prevention is effective at shutting down fraud and identifying subtle changes in fraud schemes, but there is a potential cost to the customer’s experience. Establishing digital identity trust for each customer interaction can empower ecommerce organizations to gain the most effective results from AI-based fraud prevention tools — like a sports car in high gear.”
Smoothing out the ‘Bump in the Road’ of the Payments Journey
Digital identity trust is the ability to determine the level of trust behind every customer interaction, from account creation, to login, to payments. D’Alfonso relies on the sports car metaphor as a way to describe that real-time identity trust means frictionless experiences for the best customers, while stopping fraud, chargebacks, and account takeovers from low-trust interactions. Everything fires how it should, and it’s a high-speed, luxury experience. The ability to accurately determine trust in real-time requires a depth and breadth of data achieved over billions of transactions, multiple years, and a global presence.
D’Alfonso points out that while there are multiple digital identity solution providers on the market, “many struggle with too many false positives generated from various point solutions. False positives create operational inefficiencies and, worse, a poor customer experience.”
Stuck in Low Gear
Why do legacy solutions and startups with limited data and experience struggle to establish identity trust? According to the IDC paper, there are three pitfalls:
- Too many scores: Managing multiple scores from various point-solutions, rather than a single, dynamic, entity-level score
- Data limitations: either not enough data, or too much useless data
- Speed limitations: The growing demands of transaction volume and speed requires sophisticated AI that can scale quickly and accurate, in real time
Good consumer identity trust management, he explains, is not simply a binary choice between good users and bad users; rather, it is about establishing a level of confidence in an identity based on trust and fraud signals. By making trust decisions informed on the identity of a shopper, businesses are empowered to protect themselves from losses while still limiting the amount of friction they put in front of their good customers. They can provide VIP experiences and fast checkouts for trusted customers or they can add additional authentication friction for those customers who appear risky.
Yet, determining a risk score isn’t easy. An identity framework needs more data than most companies possess. Even some of the world’s largest merchants will not have enough data to help drive reliable and accurate identity decisions and doing it in real time is another challenge.
Let’s face it. Fraud is attracted to novelty and speed, meaning fraud will exploit vulnerabilities that are often associated with new payment offerings and services. “Fraudsters also seek the ability to cash out in real time, moving stolen funds from one account to another within seconds. The axiom ‘faster payments means faster fraud’ will be true for organizations that don’t implement an identity trust network solution combined with AI-based fraud prevention,” explained D’Alfonso.
Putting the Global Network into High Gear
So why choose Kount over a legacy fraud prevention or a new entrant solution? D’Alfonso writes, “Digital commerce organizations that cannot establish a trusted identity framework that is purpose built to accurately provide a confidence level with an identity at each transaction will not be effective.”
Unlike legacy fraud prevention solutions, Kount’s Identity Trust Global NetworkTM compares each interaction, using AI and supervised and unsupervised machine learning, to 2.7 billion fraud signals in real time to deliver accurate identity trust decisions.
These decisions are based upon deep data that crosses different transaction complexities, verticals, and geographies. It’s also embedded within the user experience capabilities and allows for personalized customer experiences. This is essential for increasing customer satisfaction, reducing friction, acquiring and retaining customers, as well as building and maintaining a high brand reputation.
All of these positive outcomes translate into improved revenue, margins, and repeat business.
*IDC Vendor Spotlight, Sponsored by Kount, Establishing Identity Trust in eCommerce to Personalize Customer Experience and Reduce Friction, June 2020