Payments Journal: Better Risk Prevention in 2016

December 9, 2015 — Better Risk Prevention in 2016

It’s that time of year when people dust off their crystal balls and take a peek into the new year. Ryan Wilk, Vice President of Customer Success at NuData Security, has a prediction for 2016, and it’s based on two things he’s seeing in the payments industry.

Identifying Legitimate Customers

The cost of fraud to retailers is $9 billion annually, but that’s nothing compared to the cost of false positives, where legitimate consumer purchases are canceled due to overzealous traditional fraud prevention methods. This represents about $118 billion in lost revenue, according to the report “Future-Proofing Card Authorization” from Javelin Strategy & Research. And as criminals become more adept at successfully jumping Knowledge Based Authentication (KBA) hurdles, legitimate customers push up against ever-greater levels of friction. Risk management leaders need to find a better way to identify their valued customers and identify those who present elevated risk.

Behavioral analytics lets business become better predictors of risk while minimizing the friction legitimate users face. Biometric and behavioral analytics greatly increases industry efforts to devalue stolen data, eventually reducing the number, scale and impact of data breaches worldwide. This greatly benefits users, allowing them a frictionless and safe online experience, while continuing to protect their accounts even if their logins and passwords have been compromised. Allowing good customers to continue to interact safely online will be the most important issue in 2016.

What to Focus On Now

The key focus going forward—particularly as users are looking for that fast, no-hassle experience we’ve come to expect on our tablets and smart phones—will be eliminating false positives and removing friction across the mobile ecosystem. By harnessing the power of behavioral and biometric analysis, organizations can predict fraud with a very high degree of accuracy by identifying the real user behind the device. Focusing on the good users—and decreasing customer abandonment and attrition—can put billions back into merchants’ pockets. The ability to move beyond the machine and truly know your customer will be the differentiator that allows companies to bypass the knowledge-based authentication arms race with frausters and and leap ahead in terms of customer satisfaction and retention.